Please do not post your personal tax questions as comments on this blog posting. This is an educational blog posting only to help our clients (people relocating to Northeast Ohio that we have been retained to work with). We are NOT a RITA, CCA, or tax authority…we are the farthest thing from it. Trust us, we feel your pain! We know many people are surprised by this additional tax on their income which they never heard of (Ohio Department of Taxation, are you listening? You do a crummy job of telling people about this tax.)
When picking a new blog topic, we often just share our answers to commonly asked questions from those we are helping to relocate to Northeast Ohio. We were a bit surprised that our blog posting from 2013, explaining what R.I.T.A and CCA income taxes were, has taken on a life of its own and is one of the most viewed blog postings we ever wrote. Sorry to say we are not tax experts of any sort; we were merely trying to alert candidates and transplants about this financial impact on their budgets so they wouldn’t be surprised at tax time.
The other day, I was talking to a friend who lives in Northern Virginia and she shared that she and her husband are taxed annually on personal property, including automobiles and it really adds up. That prompted another friend to tell me about how doing something as simple as changing out appliances in Florida, where they have a vacation home, involves a licensed inspection, adding another layer of cost that doesn’t happen in Ohio. Just a few vivid examples of how every state has a different way of collecting taxes and covering the cost of the services most residents expect of their local government. If you have no personal income tax in your state, you can better believe they have figured out another way to tax you to pay for upkeep of roads, public schools, parks, libraries, etc. And if everyone flocks to your state to shop as there are not sales taxes, they are finding a way to tax you on something else…or the schools and services are in major need of resources.
Ohio’s tax burden:
Once again, Ohio is neither in the top 10 worst or top 10 best for the tax burden on its residents (rankings here), so we can’t brag about it but we also don’t have crazy taxes like several east and west coast states. Oftentimes, these two taxing bodies (that municipalities retain to collect income taxes for them) are a bill that arrives that causes a lot of confusion. So if you reside in one the municipalities that R.I.T.A. collects income taxes for, you will be assesed an additional tax in addition to state and federal taxes. Make sure you talk to your tax preparer so that you know how to plan for this additional tax.
In October of last year, Cleveland’s regional chamber of commerce (AKA Greater Cleveland Partnership) released a tax analysis study that showed the average tax burden on a resident in our region is rising. As a result, GCP will not automatically endorse any levy for a tax renewal or new tax, even if submitted by a well-deserving agency (library system, public parks, community college, etc.) unless there is an overwhelming compelling reason to do so.
In case you haven’t heard, there’s this “woman” named RITA…
RITA (Regional Income Tax Agency), is an income tax (in addition to the state and county tax) that is based on the city in which you reside AND the city in which you work (which are two different cities for most people). This is just one of the many nuances of NE Ohio taxes that could surprise newcomers (more on RITA below). Every state has a unique tax structure and, depending on what city you are moving from, Ohio’s taxes may be more or less than what you are used to paying. But many times, you don’t even know to ask about taxes you never paid before. RITA is one of those taxes!
A quick overview of Ohio’s taxes:
Ohio has a state income tax (unlike the 7 states that have no state income tax). In addition, Ohio is the only state in the US that allows each individual municipality to set its own tax rates; establish its own rules about income and deductions; and issue its own tax forms (more on that story here). We think it’s important that you know about this so you can negotiate the correct salary and make sure you are comparing apples to apples when determining cost of living in Ohio. Each suburb in Northeast Ohio has its own income tax rate, as well as income tax credits for individuals who work in one suburb and live in another. Each community relies on one of two different agencies to collect and remit income taxes on their behalf. For current info on these tax collection agencies and their rates of taxation, check out the RITA and CCA (Central Collection Agency) sites.
Each county in Ohio has its own sales tax rates. (There are five states that don’t charge customers any sales tax: Alaska, Delaware, Montana, Oregon, and New Hampshire.) Sales taxes apply to all consumer purchases including major household appliances, automobiles, clothes, toiletries, etc. Here is a small list of exemptions from Ohio sales tax. Sales taxes currently range from 6.5% to 8%. Cuyahoga County has the highest sales tax at 8%. (Check out this sales tax by county map and this Plain Dealer story that help explains Ohio taxes.) Many people will travel to a nearby county with lower sales taxes to lower their overall bill for things like appliances, computers, clothes, etc., but this doesn’t work for vehicle purchases…they charge sale tax based on the county you live in, not the county where you purchased your vehicle.
Each suburb in Northeast Ohio also has its own real estate tax rate. These taxes typically include taxes collected for the county (our regionalized form of government), the city/suburb you live in, your suburbs’s public schools, the library, the port authority, the public park system, and (many times) a technical school or community college as well. The Plain Dealer’s Data Central has a great summary/chart of the cost of real estate taxes per $100K value for suburbs in seven different counties surrounding Cleveland and Akron. This could be very helpful to know as you are house hunting in NE Ohio, so you know what amount taxes will add to your cost of living. (Auditors conduct appraisals of every real estate property every six years to update values.)
Nothing can replace the professional advice you will need from your personal accountant! Executive Arrangements has relied on its own corporate accountant, John Bonfiglio, Partner at BSB Partners, for many years to help answer questions from those relocating to NE Ohio through EA’s services – and we whole heartedly endorse him if you need a new accountant in NE Ohio!
To learn more about how Executive Arrangements can provide your recruits and recent transplants to NE Ohio with cost of living and quality of life information, call us at 216.231.9311 or contact us here.