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News Release

For immediate release: Monday, Aug. 2, 2010

New Ohio income tax tables will save taxpayers $25 million

The Ohio Department of Taxation today unveiled its first-ever adjustment of Ohio’s individual income tax tables for inflation, a move that will save Ohioans an estimated $25 million annually starting with the returns due next spring.

Ohio Tax Commissioner Richard A. Levin said that the income levels associated with each of Ohio’s nine income tax brackets will be adjusted by 0.9 percent for the 2010 taxable year. This adjustment, based on federal economic data released last Friday, will translate into an estimated $25 million annual savings when compared to what Ohio taxpayers would have collectively paid without the adjustment.

The periodic adjustment of tax brackets for inflation is known as “indexing.” Indexing is designed to prevent “bracket creep” – the tendency for individuals’ incomes to creep into a higher tax bracket because of nominal increases in income, even when the real value of that income has not increased.

“The purpose of indexing is to prevent people from being pushed into a higher tax bracket when their paychecks are only keeping up with inflation,” Levin said. Adjustment of tax brackets for inflation will benefit the vast majority of taxpayers, regardless of how their income has changed, he said.

The adjustment is being done in accordance with Ohio Revised Code section 5747.02, which calls on the tax commissioner to adjust brackets each July starting this year. The calculation was made on Friday based on new data released by the U.S. Department of Commerce Bureau of Economic Analysis.

Ohio’s indexing law actually dates back to 2002, when the 124th General Assembly called for brackets to be adjusted annually starting in 2005. But before the first adjustment could take place, lawmakers postponed indexing for an additional five years as part of a broad tax reform plan that included five annual income tax rate cuts of 4.2 percent each. Four of those income tax rate reductions are now in place, collectively saving Ohioans about $1.7 billion during the 2010 fiscal year. The fifth rate cut is scheduled for 2011.

Ohio joins about a dozen other states that also index their tax brackets to inflation, including Arkansas, California, Idaho, Iowa, Maine, Minnesota, Montana, North Dakota, Oregon, South Carolina, Vermont and Wisconsin.

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A schedule of Ohio’s new individual income tax brackets is below. Media with additional questions should contact John Kohlstrand at (614) 644-3858 or Mike McKinney at (614) 466-5461. Taxpayers with questions should call either (800) 282-1780 for individual tax matters or (888) 405-4039 for business tax concerns.

 

 

Ohio’s income tax brackets: 2009 and 2010

2009

2010

 

Tax rates

Bottom

Top

Bottom

Top

(no change)

Bracket 1

$0

$5,000

$0

$5,050

0.618%

Bracket 2

$5,001

$10,000

$5,051

$10,100

1.236%

Bracket 3

$10,001

$15,000

$10,101

$15,150

2.473%

Bracket 4

$15,001

$20,000

$15,151

$20,200

3.091%

Bracket 5

$20,001

$40,000

$20,201

$40,350

3.708%

Bracket 6

$40,001

$80,000

$40,351

$80,700

4.327%

Bracket 7

$80,001

$100,000

$80,701

$100,900

4.945%

Bracket 8

$100,001

$200,000

$100,901

$201,800

5.741%

Bracket 9

$200,001

and over

$201,801

and over

6.24%