Ohio Income Tax in Retirement: What Is Taxed, What Is Not, and the Credits Dayton Retirees Can Claim

Ask a room of retirees at a Kettering or Beavercreek coffee shop whether Ohio taxes their retirement income, and you will get three different answers. Some say Ohio taxes nothing once you retire. Others are sure the pension gets hit hard. The truth sits in between, and the details are worth a few minutes, because a mistake on the Ohio return can cost you a credit you were entitled to.

This guide walks through what Ohio taxes in retirement, what it does not, and which credits can reduce the bill. Everything here comes from the Ohio Department of Taxation and the Ohio Revised Code, and the figures are labeled with the tax year they apply to.

Social Security: Not Taxed by Ohio

This is the one most people hope to hear, and it is true. Ohio does not tax Social Security benefits. If part of your benefit is taxable on your federal return, you subtract that amount on the Ohio Schedule of Adjustments, using the line for taxable Social Security benefits. Social Security income is also not subject to Ohio school district income tax.

Tier I railroad retirement benefits get the same treatment, and so does military retirement pay. The Department of Taxation lists “retired personnel pay” from the uniformed services, reserve components, and the National Guard as deductible. That matters in Greene County, home to Wright-Patterson Air Force Base, where many retirees receive military retirement pay. It is deducted on the Ohio return and not taxed by Ohio.

Pensions, IRAs, and 401(k)s: Taxed, With a Credit

Here is where the “Ohio taxes nothing” idea falls apart. The Department of Taxation says retirement income included in your federal adjusted gross income is generally subject to Ohio income tax. That covers most pension income and withdrawals from traditional IRAs and 401(k) plans. It also applies to Ohio residents even if the income was earned while they lived or worked in another state.

Public pensions follow the same general rule when the benefit is included in your federal adjusted gross income. The Department’s retirement income FAQ does not single out OPERS or STRS Ohio, so if you collect from either system, confirm how your benefit is reported with the retirement system and on the Department’s website. Keep in mind that stock option income and non-qualified deferred compensation generally do not count as retirement income for the credits described below.

The 2026 Rate: One Bracket Above $26,050

Ohio has been moving toward a simpler income tax. Under Ohio Revised Code section 5747.02, the schedule for tax year 2026 and later has a single bracket: nothing owed on the first $26,050, then $332.00 plus 2.75% of the amount above $26,050. For comparison, tax year 2025 had two brackets, with a higher 3.125% rate on income over $100,000. Your 2026 Ohio return, which you file in 2027, uses the single-bracket schedule.

These brackets apply to taxable income as figured on the Ohio return, after adjustments such as the Social Security deduction and after exemptions. Because Ohio starts from your federal adjusted gross income and then adjusts it, your Ohio taxable income can be quite different from the total of your checks.

Credits That Can Lower Your Ohio Bill

Ohio offers several credits aimed at retirees. They are claimed on the Ohio Schedule of Credits, and the main ones carry an income limit: your modified adjusted gross income, less exemptions, must be under $100,000.

The retirement income credit

This credit is based on the retirement income included in your Ohio adjusted gross income and received on account of retirement. Under Ohio Revised Code section 5747.055, the amounts are:

• $500 or less of retirement income: $0 credit
• $501 to $1,500: $25
• $1,501 to $3,000: $50
• $3,001 to $5,000: $80
• $5,001 to $8,000: $130
• Above $8,000: $200

Amounts you deduct on the Ohio Schedule of Adjustments, such as Social Security and military retirement pay, do not count as qualifying retirement income for this credit.

The senior citizen credit

If you are 65 or older, you may be able to claim a $50 senior citizen credit for each return required to be filed, subject to the same income limit. Separately, the Department of Taxation notes a $50 senior citizen credit for school district income tax for people 65 and older.

Lump sum alternatives and the one-way door

If you received a lump sum retirement distribution, Ohio lets you elect a lump sum retirement credit in place of the regular retirement income credit, and a lump sum distribution credit in place of the senior citizen credit. The Department warns that once you elect one of these, you cannot claim the regular version that year or in any future year. Work out the numbers before checking that box, because it is not reversible.

A Worked Example With Real Arithmetic

Here is a hypothetical, simplified example. Suppose a 68-year-old Miami Valley retiree has Ohio taxable income of $46,050 on her 2026 return, after the Social Security deduction and exemptions. Of her income, $30,000 is pension and IRA income received on account of retirement. Her modified adjusted gross income less exemptions is under $100,000.

The tax on $46,050 comes from the 2026 schedule: $332.00 plus 2.75% of the amount above $26,050. That excess is $20,000, and 2.75% of $20,000 is $550. So the tax before credits is $332 plus $550, or $882.

Now the credits. Her retirement income is above $8,000, so the retirement income credit is $200. She is over 65, so she may claim the $50 senior citizen credit. Her tax drops from $882 to $882 minus $200 minus $50, which is $632. This example ignores school district income tax, other credits, and other adjustments, so it shows how the pieces fit rather than predicting anyone’s actual bill. The numbers on your own return will differ.

Traps: Roth Conversions, Early Withdrawals, and More

A few spots trip people up.

First, rollovers and conversions. Ohio taxes only retirement income that is included in federal adjusted gross income. A rollover that creates no federal income is not taxable in Ohio. A rollover that does create federal income, such as a Roth IRA conversion, is taxable in Ohio too. If you are considering a conversion, remember to count the Ohio tax alongside the federal tax.

Second, early withdrawals. The retirement income credit applies only to income received on account of retirement. The Department says early withdrawals and distributions do not qualify.

Third, the $100,000 line. The retirement and senior credits require modified adjusted gross income less exemptions to be under $100,000. A large IRA withdrawal or conversion in one year can push you over and cost you credits worth up to $250 combined. That is one reason we look at income year by year, not just in total.

Fourth, joint filers. Retirement income that you do not deduct on the Schedule of Adjustments counts as qualifying income for the joint filing credit, while deducted amounts such as Social Security, railroad, or military retirement pay do not.

Withholding and Filing

Retirees generally need to arrange for state and school district tax to be withheld from retirement payments, or make estimated payments. If you have recently retired from GE Aviation or another employer and started collecting a pension, it is worth checking whether Ohio withholding is set up on that payment.

The Department of Taxation also notes that you generally do not need to file if your Ohio adjusted gross income is $0 or less, if your exemption amount equals or exceeds your Ohio adjusted gross income, or if your credits cover your tax liability. You must still file if you owe school district tax.

Where to Go From Here

The credits and deductions only help if they land on the right lines. Keep your Form 1099-R statements and your federal return handy when you prepare your Ohio return, and double-check that Social Security and any military retirement pay are deducted.

If you would like help thinking through how your pension, IRA withdrawals, and Social Security fit together, Medicare & Retirement Solutions Group in Beavercreek offers a free consultation. Call us or visit medretiregroup.com, and we will take a look at the whole picture alongside your tax preparer.

This article is general educational information, not individualized tax, insurance, or investment advice. Rules and figures change and individual circumstances vary — please confirm details with your plan, or speak with a qualified professional, before acting.