Locum Tenens Taxes in Ohio

Ohio uses a single individual return, Form IT 1040, for residents and nonresidents. Instead of a separate nonresident form, a nonresident files the IT 1040 and attaches Form IT NRC (the nonresident credit calculation), which backs out the tax on income not earned in Ohio. In effect, you compute tax as if everything were taxable, then the NRC credit strips out the non-Ohio share, leaving tax only on Ohio-source income.

There's no meaningful minimum-day exception: if you have Ohio-source income above trivial amounts, plan to file. The 2026 structure exempts the first $26,050 of nonbusiness income from tax entirely, but for a physician the relevant math almost always runs through the business income rules covered in Section 06, not the nonbusiness brackets.

Part-year rules apply if you actually move into or out of Ohio during the year. A traveling physician keeping a tax home elsewhere stays a plain nonresident, which is the status this page assumes.

Like most states, Ohio sources personal-services income to where the services are physically performed. For a 1099 locum, the income tied to days worked at Ohio facilities is Ohio-source business income, regardless of where the staffing agency is located, where your LLC is registered, or where the deposit lands. The IT NRC allocation generally follows your books: contract-level records tying payments to Ohio assignments are best, and a working-day ratio is the fallback.

The municipal layer sources even more granularly: each city taxes the net profits earned within that city's limits. A year split across hospitals in Toledo, Dayton, and a township with no municipal tax means three different municipal answers from the same Ohio income. Your day log needs city-level detail in Ohio, not just state-level.

Ohio has reciprocal agreements with Indiana, Kentucky, Michigan, Pennsylvania, and West Virginia. A resident of one of those states who earns W-2 wages in Ohio pays state income tax only to their home state, and can stop Ohio withholding with the appropriate exemption certificate (Form IT 4NR).

The agreements cover wages only. Independent-contractor and business income is excluded, so a 1099 locum living in Pittsburgh or Louisville and working Ohio assignments still files the Ohio nonresident package and claims a resident credit at home. And crucially, reciprocity never applies to municipal taxes: even a W-2 physician protected at the state level can owe an Ohio city's income tax on wages earned there.

W-2 agencies withhold Ohio state tax (unless reciprocity applies) and are generally required to withhold municipal tax for the city where you work once you pass the occasional-entrant threshold. 1099 physicians get no withholding at any layer.

For state tax, quarterly estimates go in on Form IT 1040ES, though if the business income deduction covers your Ohio-source income, your required state estimates may be minimal. For municipal tax, RITA and CCA each have their own quarterly estimate systems, and the annual return (RITA's Form 37 for individuals) reconciles what you owe city by city. You may have heard of the 20-day rule: that's a withholding rule for employers with occasional-entrant employees. It does not exempt a self-employed physician's net profits from municipal tax, a distinction that trips up a lot of 1099 locums.

City net profit taxes

Ohio municipalities tax the net profits of business conducted within their limits, and that includes a nonresident 1099 physician's earnings from shifts worked at a hospital inside the city. Rates commonly run 1% to 3% (Columbus and Cleveland are at the higher end). Most cities outsource collection to RITA (Regional Income Tax Agency) or CCA (Central Collection Agency, run by Cleveland); a few large cities like Columbus and Cincinnati self-administer. RITA's own guidance is blunt: nonresidents who conduct business in a RITA municipality must file an annual return, even if no tax is due.

Two things make the municipal layer expensive relative to its rate. There's no business income deduction: the first dollar of net profit is taxed. And most home states give no resident credit for municipal taxes, so the city tax is usually a true out-of-pocket cost rather than a prepayment that washes out at home.

School district income taxes (residents only)

Ohio also lets school districts levy income taxes, and a few hundred do. The good news for travelers: the school district income tax applies to residents of the district only. Working an assignment inside a taxing district does not make a nonresident physician liable. It becomes relevant only if you actually establish Ohio residency, at which point your home district's SDIT joins the stack.

The business income deduction is the headline

Ohio's business income deduction lets an individual deduct the first $250,000 of business income ($125,000 if married filing separately), with the excess taxed at a flat 3% instead of the regular rates. 1099 locum income reported on Schedule C, or flowing through your S-corp, is generally business income for this purpose, and the deduction is claimed on the individual return via Schedule IT BUS. Nonresidents claim it against Ohio-source business income. Practical upshot: a nonresident locum with $200,000 of Ohio-source 1099 income can owe zero Ohio state income tax, and one with $400,000 owes 3% on roughly the excess over $250,000.

Before you celebrate, remember the two limits: the BID does nothing at the municipal layer, and if your home state taxes the same income, wiping out the Ohio tax mostly shifts the bill to your home state rather than eliminating it (Section 07 walks the math).

Entity taxes and the PTET election

Ohio has no entity-level franchise tax on S-corps. The commercial activity tax (CAT) applies only above a gross-receipts exclusion that now sits at $6 million, far beyond a solo physician practice, so it's rarely relevant to locums. The standard S-corp self-employment-tax math works in Ohio without a California-style entity minimum.

Ohio does offer a pass-through entity tax election (Form IT 4738) at a 3% rate, the usual SALT-cap workaround. But it interacts awkwardly with the business income deduction: the BID is claimed only on the individual return, so an electing entity pays 3% on income that the owner might have owed nothing on individually, and the owner then files individually to claim the BID and recover the difference. For a solo locum S-corp under the $250,000 mark, the election often prepays tax for no net benefit. Model it both ways before electing.

Illustrative example, not a specific client outcome. An emergency physician lives in Georgia (2026 flat rate 4.99%) and earns $100,000 of 1099 net income from assignments at a hospital inside an Ohio city with a 2.5% municipal income tax. Watch how Ohio's generous state math plays out end to end.