Complete Guide to Ohio LLC Taxes in 2025
Ohio offers a uniquely favorable tax environment for LLC owners. With no annual report requirement, no entity-level income tax, and graduated income tax rates starting at 0% (the first $26,050 is tax-free), the Buckeye State is one of the cheapest states for LLC operation. The main tax consideration beyond income tax is the Commercial Activity Tax (CAT) -- a 0.26% gross receipts tax that only applies to businesses with over $1 million in Ohio gross receipts.
How Ohio Taxes LLCs
Ohio treats LLCs as pass-through entities. The LLC does not pay Ohio income tax at the entity level. Instead, all income passes through to members who report on Ohio Form IT 1040. Multi-member LLCs file Ohio Form IT 4708 as an information/composite return.
Ohio's income tax is notable for its generous 0% bracket on the first $26,050 of taxable income, making it effectively tax-free for small-income LLCs.
Key Point: Ohio's combination of no annual report, no entity-level tax, a $0 bracket up to $26,050, and maximum rate of just 3.5% makes it one of the most tax-friendly states in the Midwest for LLC owners.
Ohio Income Tax Brackets (2025)
| Taxable Income | Tax Rate |
|---|---|
| $0 - $26,050 | 0% |
| $26,051 - $46,100 | 2.765% |
| $46,101 - $92,150 | 3.226% |
| $92,151 - $115,300 | 3.688% |
| Over $115,300 | 3.5% |
Ohio Commercial Activity Tax (CAT)
The CAT is Ohio's version of a business-level tax, imposed on gross receipts rather than net income. Key thresholds:
- Under $150,000: Exempt -- no CAT obligation
- $150,000 - $1,000,000: Minimum tax of $150/year
- Over $1,000,000: 0.26% on gross receipts above $1M
The CAT is significant because it applies to gross receipts regardless of profitability. A business with $2M in revenue but only $50K in profit still pays CAT on the full $2M. However, for most small LLC owners, the $150,000 exemption means the CAT is irrelevant.
No Annual Report Requirement
Like New Mexico, Ohio does not require LLCs to file an annual report or pay an annual maintenance fee. This makes Ohio one of the cheapest states for ongoing LLC compliance.
Federal Taxes for Ohio LLC Owners
- Self-Employment Tax (15.3%): Social Security + Medicare, standard federal rates
- Federal Income Tax: 10% to 37% for 2025
- QBI Deduction: Up to 20% under Section 199A
Tax Tip: Since Ohio's maximum state rate is only 3.5%, federal taxes represent the overwhelming majority of your tax burden. S-Corp election is particularly valuable for Ohio LLC owners. Use our S-Corp Tax Calculator to see potential savings.
Ohio LLC Filing Deadlines
| Filing Type | Deadline | Extension |
|---|---|---|
| Individual (IT 1040) | April 15 | October 15 |
| Partnership (IT 4708) | March 15 | September 15 |
| CAT Annual Return | May 10 | With extension |
| Estimated Payments | Apr 15, Jun 15, Sep 15, Jan 15 | None |
Ohio LLC Formation Costs
- Articles of Organization: $99 filing fee
- Registered Agent: Required; can be a member or commercial service
- Annual Report: $0 (none required)
- EIN: Free from the IRS
Ohio vs. Neighboring States
| State | Income Tax | Annual Fee | Entity Tax |
|---|---|---|---|
| Ohio | 0-3.5% | $0 | CAT 0.26% |
| Pennsylvania | 3.07% flat | $7 | None |
| Indiana | 3.05% flat | $32 | None |
| West Virginia | 2.36-5.12% | $25 | None |
| Michigan | 4.05% flat | $25 | None |
Common Ohio LLC Tax Mistakes
- Ignoring CAT obligations: If your gross receipts exceed $150,000, you must register and file
- Municipal income tax: Many Ohio cities impose local income taxes (1-3%) -- don't forget these
- Not using the 0% bracket wisely: The first $26,050 is tax-free -- factor this into planning
- Missing estimated payments: Ohio requires quarterly payments if you owe $500+
Ohio Local Taxes Note: Ohio is unique in that many municipalities impose their own income tax (typically 1-3%). These are separate from state tax and must be filed with each city where you work or live. Factor municipal taxes into your total tax calculation.
Ohio's Unique Tax Advantages for LLC Owners
Ohio stands out among Midwestern states for its combination of no annual report requirement, no entity-level income tax, and a generous 0% bracket on the first $26,050 of taxable income. This means a part-time LLC owner earning $25,000 in Ohio pays zero state income tax. Even at higher income levels, the maximum rate of 3.5% is competitive with neighboring states like Indiana (3.05%) and well below the national average.
The state's approach to business taxation reflects a deliberate shift away from entity-level taxes toward a broader, lower-rate system. The elimination of the corporate income tax (replaced by the CAT) and the reduction of individual income tax rates over the past decade have made Ohio increasingly attractive for small business formation.
Ohio Commercial Activity Tax (CAT) Deep Dive
The Commercial Activity Tax is one of the most misunderstood aspects of Ohio business taxation. Unlike income taxes that apply to profits, the CAT is a gross receipts tax that applies to total revenue regardless of profitability. This means a business with $2 million in revenue but $0 in profit still owes CAT on the full $2 million.
However, the CAT structure has important thresholds that shield most small LLC owners from any meaningful impact:
- Under $150,000 gross receipts: Completely exempt -- no registration or filing required
- $150,000 - $1,000,000: Flat minimum tax of $150 per year. No percentage-based calculation.
- Over $1,000,000: 0.26% on gross receipts above $1 million, plus the $150 base amount
For the vast majority of solo LLC owners and small partnerships, the CAT is irrelevant because their gross receipts fall under $150,000. Those in the $150K-$1M range pay only $150 per year -- less than most states' annual report fees. The CAT only becomes a significant factor for larger businesses with multi-million dollar revenues.
Ohio Municipal Income Taxes -- The Hidden Cost
Ohio's most significant "hidden" tax for LLC owners is the municipal income tax imposed by nearly every city and village in the state. Unlike most states where local income taxes are rare or limited to a few major cities, Ohio has over 600 municipalities that levy their own income taxes, typically ranging from 1% to 3%.
Key cities and their municipal tax rates include:
| City | Municipal Tax Rate | Credit for Taxes Paid to Other Cities |
|---|---|---|
| Columbus | 2.5% | Full credit up to 2.5% |
| Cleveland | 2.5% | Full credit up to 2.5% |
| Cincinnati | 1.8% | Full credit up to 1.8% |
| Akron | 2.5% | Full credit up to 2.5% |
| Dayton | 2.5% | Full credit up to 2.5% |
| Toledo | 2.5% | Full credit up to 2.5% |
These municipal taxes apply to net profits from business activity within the municipality. If your LLC operates in multiple Ohio cities, you may need to file returns in each city where you have business activity. Many Ohio LLC owners find that municipal taxes represent a larger liability than state income tax, particularly in major metropolitan areas.
Ohio LLC Formation and Ongoing Compliance
Forming an LLC in Ohio is straightforward and relatively affordable. Key steps include filing Articles of Organization with the Secretary of State ($99), obtaining an EIN from the IRS (free), registering with the Ohio Department of Taxation, and obtaining any necessary municipal business licenses.
Ohio's lack of an annual report requirement is a significant advantage for ongoing compliance. Unlike most states where failure to file an annual report can result in administrative dissolution, Ohio LLCs remain in good standing indefinitely without any periodic filing with the Secretary of State. This reduces both compliance costs and the risk of inadvertent dissolution.
However, LLC owners should still maintain proper records including:
- Operating agreement: Recommended though not legally required
- Meeting minutes: Important for multi-member LLCs to document major decisions
- Financial records: Required for tax filing and potential audits
- Registered agent information: Must maintain a statutory agent in Ohio at all times
Ohio Business Incentives and Credits
Ohio offers several business incentive programs that can further reduce the tax burden for qualifying LLC owners:
- Job Creation Tax Credit (JCTC): A refundable credit against personal income tax for businesses creating new jobs in Ohio. The credit amount is based on a percentage of new payroll.
- Ohio Opportunity Zones: Enhanced federal Opportunity Zone benefits with additional state incentives for investments in designated areas.
- Research and Development Credit: A 7% credit on qualifying R&D expenditures above a base amount.
- Ohio New Markets Tax Credit: Credits for investments in qualified community development entities serving low-income communities.
- Motion Picture Tax Credit: For film and television production activities in Ohio.
These incentives are particularly valuable when combined with Ohio's already-low tax rates, potentially reducing the effective state tax rate to near zero for qualifying businesses.
S-Corp Election Considerations in Ohio
Ohio follows the federal S-Corp election, so no separate state filing is required. The primary benefit of S-Corp election in Ohio is the federal self-employment tax savings, as Ohio's already-low income tax rates limit the state-level benefit. However, for LLC owners in municipalities with high local tax rates (2-2.5%), S-Corp election can also reduce local tax liability since distributions to S-Corp shareholders are generally not subject to Ohio municipal income tax.