Ohio is unusual: for many freelancers the state income tax on business income is close to zero, while the city income tax is the one that actually costs money. Here is why, and what to plan for.
What you pay on freelance profit
| Tax | Rate |
|---|---|
| Federal self-employment tax | 15.3% on 92.35% of profit |
| Federal income tax | 10%–37% |
| Ohio income tax on business income | First $250,000 deducted; 3% flat above that |
| Ohio income tax on other income | 2.75% above $26,050 (2026) |
| Municipal income tax | Set by each city — often 2%–2.75% of net profits |
The business income deduction
Ohio lets you deduct the first $250,000 of business income included in your federal adjusted gross income ($125,000 if married filing separately). Business income above that is taxed at a flat 3%. Net profit from a sole proprietorship counts as business income. So a freelancer whose only income is, say, $85,000 of profit typically owes little or no Ohio state income tax.
Other income — wages from a job, interest and so on — is taxed separately. For 2026, a 2025 law (HB 96) removes Ohio’s top 3.125% bracket, so nonbusiness income above $26,050 is taxed at a single 2.75% marginal rate.
Municipal income tax: the real cost
Most Ohio cities and villages levy their own income tax, and it applies to net profits from self-employment, not just wages. Each city sets its own rate — for example 2.75% in Youngstown and 2.5% in Hilliard.
- Many cities use the Regional Income Tax Agency (RITA), where self-employed residents file Form 27; others collect the tax themselves.
- RITA requires quarterly estimated payments once you expect to owe $200 or more in city tax.
- Sole proprietors can’t use the state’s centralized net-profit filing option, so you file directly with your municipality (or RITA).
Look up your city’s rate and collection agency before you set your savings rate.
State estimated payments
Ohio expects estimated payments if your Ohio tax after withholding is more than $500. For 2026, Ohio uses a single combined estimated payment coupon (the OUPC). If the business income deduction wipes out your state tax, you may not need state estimates at all — only city and federal ones. Use the quarterly estimated tax calculator for the federal part.
The Commercial Activity Tax
Ohio’s CAT is a tax on gross receipts, but businesses with receipts under the $6 million exclusion don’t owe it or file returns. It doesn’t affect typical freelancers.
How much to set aside
In the tax set-aside calculator, enter your city income tax rate (for example 2.5) in the state field. Add state tax only if your business income exceeds $250,000 or you have significant other income.