Ohio Capital Gains Tax, Explained

House Bill 96 — the 2025 state budget — finished a bracket compression Ohio had been running for years. A five-bracket schedule became two rates, 2025 stepped the top rate down to 3.125%, and on January 1, 2026 the last bracket disappeared: Ohio now taxes nonbusiness income at 0% up to $26,050 and a flat 2.75% above that.

Capital gains ride along, because Ohio has never had a separate capital gains rate. Every gain — stock, crypto, a rental building, a business interest — enters the return as ordinary income and takes the same flat rate as your salary. Sell in 2026 instead of 2025 and the identical gain costs less at the state level.

Take a married couple in Columbus: $180,000 of W-2 income, and they sell index funds held four years for a $100,000 long-term gain. Their wages already fill the $26,050 zero bracket, so the Ohio answer is one line of arithmetic: $100,000 × 2.75% = $2,750.

The federal side does the heavy lifting. The gain sits in the 15% long-term band, and total MAGI of $280,000 runs $30,000 past the $250,000 NIIT threshold:

Notice where the leverage is: shaving the federal layer (holding past one year, harvesting losses, managing the NIIT threshold) moves thousands; the Ohio layer is already close to the floor. Our capital gains tax calculator runs both layers — and the federal brackets guide shows where the 0/15/20% lines fall this year.

Three governments could theoretically reach a gain in Ohio. Two actually do:

• Federal: 0%, 15%, or 20% on long-term gains depending on income, plus the 3.8% NIIT once MAGI passes $200,000 single / $250,000 joint. Short-term gains take your ordinary federal bracket. On a rental sale, depreciation comes back at up to 25% as recapture.
• Ohio: flat 2.75%, short-term or long-term, it doesn't matter. Ohio's rate doesn't care how long you held.
• Your city: generally nothing. Ohio municipal income taxes typically apply to earned income — wages and self-employment — not to investment income like capital gains. Ordinances vary, so confirm your city's treatment, but for most sellers the municipal line on a stock or property gain is zero.

Real estate sellers have one more federal lever worth knowing: a 1031 exchange can defer the federal gain on investment property entirely — and with Ohio's rate this low, the federal deferral is where nearly all the value sits.

Ohio runs a second track for business income: the first $250,000 is deducted entirely — the business income deduction, or BID — and anything above it is taxed at a flat 3%. HB 96 left this regime untouched.

Why does a capital gains page care? Because in some circumstances, the gain from selling an ownership interest in a business can itself qualify as business income — which means the first $250,000 of the gain could be deducted before Ohio taxes a dollar. The tests are fact-specific: what was sold, how the deal was papered, and your role in the business all drive the answer. This is a planning conversation, not a checkbox.

The stakes on a $1,000,000 gain: treated as ordinary nonbusiness income it costs $27,500 (2.75%); if it qualifies as business income, the first $250,000 comes off and the remaining $750,000 × 3% = $22,500 — a $5,000 swing, and far bigger at smaller gain sizes where the $250,000 deduction covers most of the proceeds.

At a flat 2.75%, Ohio's take on a gain now undercuts most of its neighbors — among income-tax states in the Midwest, it's one of the cheapest places to realize a large gain. That changes what planning is worth doing:

• State-level timing games mostly stop mattering. In a progressive-bracket state, splitting a gain across years can cut the state bill meaningfully. At a flat 2.75%, spreading a gain saves Ohio nothing — every dollar pays the same rate whenever it lands. Run timing decisions on the federal brackets instead.
• Ordinary-income strategies got cheaper. Anything that creates ordinary income — a Roth conversion, accelerating a bonus, harvesting a short-term gain — now costs just 2.75% at the state level. If you've been putting off conversions, our Roth conversion calculator shows what a conversion year costs with Ohio's new rate in the mix.
• Loss harvesting still works. Losses net against gains on the federal return and flow through to Ohio — a dollar of harvested loss saves federal rate plus 2.75%.
• Low rate ≠ no paperwork. A six-figure gain still creates an estimated-payment obligation — see below.

Full walkthrough: estimated tax payments guide.