Are you a resident of the Buckeye State with plans to sell a home, condo, or apartment? Federal, state, and local entities each have their own real estate taxation schedules. Knowing how real estate taxes work and which exemptions you can benefit from when selling a home in Ohio will help you understand how much of your profit you get to keep.
Do You Pay Capital Gains Tax When Selling a Home in Ohio?
Ohio taxes gains on the sale of capital assets as income. According to Ohio law (OH Revised Code 5747.20), gains or losses from the sale of real property are allocable to the state as nonbusiness income if the property is located in Ohio.
The Ohio Department of Taxation defines nonbusiness income as any income not earned from business operations, specifically including interest, dividends, and capital gains as examples of nonbusiness income. Capital gains realized in the Buckeye State are treated as income and subjected to the state’s income tax schedule.
The 4 Levels of Ohio Taxes on Real Estate
When selling a house or an apartment in Ohio, sellers must pay four layers of real estate taxes: federal capital gains taxes, state income taxes, state transfer taxes, and county transfer taxes.
Federal Capital Gains Taxes
Rate: Varies from 0% to 20%, depending on the taxpayer’s situation. The most common rate is 15%.
You must pay federal capital gains tax when selling property in Ohio. The IRS defines two types of capital gains: short-term and long-term. It is considered a short-term capital gain if you have owned the property for one year or less before selling it. If you’ve held it for over a year, it is a long-term capital gain instead.
Short-term capital gains are taxed as ordinary income, meaning the tax brackets for this type of gain are identical to those for standard federal income taxes.
Long-term capital gains tax brackets are calculated based on the seller’s filing status and income levels:
- 0% for taxpayers meeting the following conditions:
- The taxpayer’s filing status is “Single” or “Married Filing Separately” and their taxable income of $41,675 or less
- The taxpayer’s filing status is “Married Filing Jointly” or “Qualifying Surviving Spouse,” and their taxable income of $83,350 or less
- The taxpayer’s filing status is “Head of Household” and their taxable income of $55,800 or less
- 15% for taxpayers meeting the following conditions:
- The taxpayer’s filing status is “Single,” and their taxable income is over $41,675 but $459,750 or less
- The taxpayer’s filing status is “Married Filing Jointly” or “Qualifying Surviving Spouse,” and their taxable income is over $83,350 but $517,200 or less
- The taxpayer’s filing status is “Married Filing Separately,” and their taxable income is over $41,675 but $258,600 or less
- The taxpayer’s filing status is “Head of Household,” and their taxable income is over $55,800 but $488,500 or less
- 20% for taxpayers exceeding the maximum thresholds outlined for each respective filing status in the 15% category (e.g., taxpayer filing as single and earning over $459,750)
Paragraph 121 of the Internal Revenue Code (IRC) outlines exceptions to long-term capital gains taxes. Sellers can exclude up to $250,000 (or $500,000 for married couples filing jointly) on the gains realized following the sale of their home if they pass the “ownership and use tests.” You qualify for this exclusion if:
- The house sold was your primary residence
- You owned the home for two years or more
- You lived in the home and used it as your primary address for two years or more
How is the Federal Capital Gains Tax Calculated?
According to the National Association of Realtors, the median period of homeownership in the United States is 13 years. While the exact duration varies by area, it typically falls between 6 and 21 years. These stats show that most individuals selling a home in the United States will pay long-term federal capital gains taxes.
Example: Olivia is a taxpayer filing as head of household. She lives in a single-family home in Cincinnati, OH, and her annual income is $190,000. Although Olivia purchased the home for $284,000 eight years ago, she only began using the property as her primary residence two years and six months ago.
Olivia sold her Cincinnati home after eight years of ownership and 30 months of use as a primary residence. The home’s final purchase price was $547,000, meaning she realized $263,000 of long-term capital gains. Under typical circumstances, her filing status as head of household and her annual income would place her in the 15% federal capital gains tax bracket.
However, Olivia meets the IRS ownership and use tests because the periods of ownership and use as a primary residence each exceed the two-year minimum. IRC Paragraph 121 allows her to exclude up to $250,000 on capital gains realized from the federal capital gains tax.
Because her capital gains are over that amount, she will pay federal capital gains taxes but only on the amount over the first $250,000. Consequently, Olivia only needs to pay capital gains taxes on the $13,000 above the threshold, meaning she only owes the IRS $1,950 in capital gains taxes.
Ohio State Capital Gains Tax (If Applicable)
Rate: 0.0% – 3.99%
Ohio legislation taxes capital gains on the sale of homes in the state as individual, nonbusiness income. Consequently, Ohio residents must factor capital gains into their state taxable income, as they will pay taxes on capital gains using the state’s standard income tax schedule.
For Tax Year 2022, Ohio imposed five income tax brackets:
- If the taxpayer’s Ohio taxable income was $26,050 or less, the state’s income tax is 0%.
- If the Ohio taxable income was over $26,050 but $46,100 or less, the tax is $360.69 plus 2.765% of every dollar earned above the first $26,050
- If the Ohio taxable income was over $46,100 but $92,150 or less, the tax is $915.07 plus 3.226% of excess above the first $46,100 earned.
- If the Ohio taxable income was over $92,150 but $115,300 or less, the tax is $2,400.64 plus 3.688% of excess above the first $92,150 earned.
- If the Ohio taxable income was over $115,300 or less, the tax is $3,254.41 plus 3.99% of excess above the first $115,300 earned.
Ohio’s income tax schedule is subject to yearly changes, such as modifications to the tax rates or the addition and removal of new tax brackets.
How is the Ohio State Capital Gains Tax Calculated?
The Ohio Department of Taxation requires taxpayers who realized capital gains to report them as individual nonbusiness income. Consequently, Ohioans pay taxes on capital gains alongside other income taxes.
Example: As a resident of Cincinnati, OH, with an annual income of $190,000 for Tax Year 2022, Olivia is subject to the highest income tax bracket. Under typical circumstances, she owes the state government $3,254.41 plus 3.99% of excess above the first $115,300. In Olivia’s case, the excess is $74,700, meaning she must pay $3,254.41 plus 3.99% of $74,700, or $2,980.53, for a total of $6,234.94 in state income taxes.
However, when Olivia sold the house and realized a capital gain of $263,000, her income for the tax year is considered to have increased by that amount. Consequently, Olivia owes income taxes as if she earned $453,000. The excess over the first $115,300 becomes $337,700. Olivia must pay $3,254.41 plus 3.99% of $337,700, or $13,474.23. She owes a total of $16,728.64 in state income taxes.
Ohio State Transfer Taxes
Rate: 0.1%
In addition to taxing capital gains as income, the Ohio state government taxes real estate property sales through the Real Property Conveyance Fee. This tax features two layers; a statewide tax, mandatory on all real property sales in the Buckeye State, and an additional county-level tax.
The state-level portion of the Real Estate Conveyance Fee is 1 mill, equal to $1 for every $1,000 in the final consideration amount of any property sold in Ohio. The seller is responsible for paying this fee.
How is the Ohio State Transfer Tax Calculated?
When selling a house in Ohio, the state’s Real Property Conveyance Fee is equal to 1 mill of the home’s final sale price.
Example: When Olivia sold her home for $547,000, the state levied the Real Estate Conveyance Fee on the sale. The state-level transfer fee is 1 mill, meaning Olivia paid $1 for every $1,000 in the conveyance. In this case, the fee was $547.
Ohio County Transfer Taxes
Rate: 0.1% – 0.3%
The Real Property Conveyance Fee also features a county-level layer, which authorizes each county in Ohio to levy its own tax on real estate transfers in addition to the state-level fee.
According to Ohio law (OH Revised Code 322.02), each county has the legal authority to levy up to 3 mills, or $3 for every $1,000 in the final consideration amount of each real estate property sold. Not all counties may impose this fee, meaning only the state-level transfer fees apply. As this fee is a county-level layer to the Real Property Conveyance Fee, the seller is also responsible for paying this tax.
How is the Ohio County Transfer Tax Calculated?
The county-level layer of the Real Property Conveyance Fee is calculated the same way as its state-level equivalent: it is a fraction of the property’s final sale price.
Example: Olivia’s home was located in Cincinnati, OH, a part of Hamilton County. According to the Hamilton County Auditor’s website, the county-level transfer fee, which Hamilton County refers to as the Permissive Tax, was $2 for every $1,000 (2 mills) in the conveyance amount at the time of the sale. Consequently, Olivia paid $1,094 to the county in transfer taxes.
Ohio Exemptions and Deductions for Real Estate Taxes
Although residents of the Buckeye State should expect to pay taxes on the sale of a home, local and state legislation may allow specific sellers to benefit from exemptions to reduce their closing costs.
Ohio Capital Gains Exemptions
Ohio real estate legislation does not provide specific exemptions or deductions for capital gains. Additionally, the state taxes capital gains as income, for which Ohio law provides no exemptions or deductions except in a specific case: individuals who fall into the lowest tax bracket.
As of Tax Year 2022, individuals who earn $26,050 or less in taxable income are exempt from the income tax due to the tax rate for this bracket being 0%. This rule can technically include taxpayers who have realized capital gains as long as the gains realized do not push them into a higher bracket.
Ohio Transfer Tax Exemptions
The Ohio Department of Taxation outlines exemptions to the Real Estate Conveyance Fee, including the county-level layer. If the sale of your home in Ohio falls into one of these categories, you may be exempt from paying the fee:
1. Transfers To and From Government Entities
The Real Estate Conveyance Fee does not apply to any sales or transfers of real property if either the buyer or the seller is one of the following entities:
- The U.S. government
- A federal government agency
- The state of Ohio
- Any political subdivision of the state of Ohio
2. Gifts of Property To Family Members
Gift transfers of real estate property are exempt from the Real Estate Conveyance Fee if the recipient is the donor’s spouse, child, or their child’s spouse.
3. Survivorships
Transfers of property from a deceased individual to their surviving spouse or tenant are exempt from the Real Estate Conveyance Fee.
4. Transfers to or from Tax-Exempt Non-Profits
Ohio real estate legislation does not tax transfers or sales of real estate property to or from a non-profit agency if it meets all of the following criteria:
- The non-profit agency is exempt from federal income taxation
- The transfer has no consideration
- The purpose of the transfer is to further the non-profit agency’s charitable goals or public purpose.
A typical example of a non-profit agency exempt from federal income tax is a Section 501(c)(3) organization.
5. Transferred Ordered by Debt, Delinquent Taxes, and Court Orders
Any property sold or transferred to release a debt security, pay delinquent taxes, or due to a court order is exempt from the Real Estate Conveyance Fee.
6. Transfers Due to Corporate Reorganizations and Dissolutions
Corporations undergoing reorganization or dissolution are exempt from paying the Real Estate Conveyance Fee when selling or transferring property to stockholders for their shares.
7. Lease Transfers
Property sold or transferred due to a lease are exempt from the Real Estate Conveyance Fee, except if the lease is for a term of years that can be indefinitely renewed.
8. Transfers to Grantees to Facilitate Sales
Transferring property to a grantee other than a dealer does not require the original owner to pay the Real Estate Conveyance Fee if the purpose of the transfer is to facilitate the property’s eventual sale.
9. Transfers With No Consideration
Specific sales or transfers of real property without consideration are exempt from the Real Estate Conveyance Fee. The consideration must meet all the following criteria to be eligible:
- The transaction must not be a gift
- The consideration does not include money or valuable and tangible assets that can be readily converted into money, such as gold bullion.
10. Easements and Right-of-Ways
Ohio exempts property easements or right-of-ways to another party from the Real Estate Conveyance Fee if the interest in the easement or right-of-way is $1,000 or less.
11. Transfers between Trustees and Grantors
Grantors transferring real property to a trustee do not need to pay the Real Estate Conveyance Fee if they reserve unlimited power to revoke the trust. Trustees transferring such property back to a grantor pursuant to a grantor’s right to trust revocation or asset withdrawal are also exempt from paying the transfer tax.
12. Transfers to Trust Beneficiaries
Transfers of property to trust beneficiaries are exempt from the Real Estate Conveyance Fee if one of the following conditions apply:
- The fee was already paid following a transfer from the grantor or to the trustee
- The transfer was completed due to trust provisions that became irrevocable after the grantor’s death
Ohio Real Estate Taxes vs. Other States
Ohio’s combined state and county-level real estate taxes make it one of the more expensive states to sell property in the nation. Below is a comparison of Ohio’s real estate taxation system with equivalents in similar states.
Illinois
Capital Gains Tax Rate: 4.95%
According to Illinois tax legislation (35 ILCS 5/201), capital gains realized in the state are taxed as income. An individual selling a property in Illinois will therefore be at the state’s flat rate of 4.95%.
Transfer Tax Rate: 1% levied by the state + 0.50% levied by the county + variable municipal taxes
Illinois taxes property transfers on multiple layers: state-level, county-level, and municipal-level. According to Illinois law (35 ILCS 200/31-10), state-level transfer tax is $0.50 per $500, or about 1%, whereas the county-level transfer tax is $0.25 per $500, equivalent to 0.5%. Municipal-level transfer taxes vary from locality to locality: some impose no taxes, some impose flat fees, and others impose tax rates that may reach up to $10 per $1,000 (1%) or more.
Georgia
Capital Gains Tax Rate: Approximately 1% to 5.75%
Georgia taxes capital gains as income, subjecting them to the state’s six tax brackets. The amount owed depends on the taxpayer’s filing status and taxable income in the state.
For example, a single taxpayer earning $100,000 of Georgia Taxable Income and realizing a capital gain of $35,000 will be taxed as though they earned $135,000 for the tax year. Per the Georgia Tax Rate Schedule, they must pay $230 plus 5.75% of the amount over $7,000, or $128,000. Because 5.75% of $128,000 is $7,360, that taxpayer would owe $230 + $7,360, or $7,590 in state income taxes.
Transfer Tax Rate: 0.1% ($1 for the first $1,000 + $0.10 for each additional $100)
According to the Georgia Department of Revenue (GA-DoR), real property transfers in the state are taxed at a rate of $1 for the first $1,000 plus 10 cents for every additional $100 or fraction thereof in the final conveyance amount. This transfer tax schedule effectively corresponds to an effective tax rate of 0.1%.
North Carolina
Real estate taxes in North Carolina are near the national average. Most residents can expect to pay federal capital gains taxes, state income taxes, and state transfer taxes. Specific counties may impose additional transfer taxes.
- Capital Gains Tax Rate: 4.75% for Tax Year 2023, 4.99% for Tax Year 2022
Capital gains realized in North Carolina are taxed as income, similar to Ohio. According to the North Carolina Department of Revenue (NCDOR), the state levies a flat individual income tax rate subject to frequent readjustments, typically yearly or biyearly. For Tax Year 2022, the income tax rate was 4.99%. The state changed the rate to 4.75% for Tax Year 2023.
- Transfer Tax Rate: 0.2%
According to the North Carolina General Statutes (Sections 105.228.28, 29, and 30), the state collects a tax on property transfers called the Excise Tax on Conveyances. The rate is $1 per $500 or fraction thereof in the final consideration amount, or about 0.2%.
When Do You Pay Capital Gains Tax on Ohio Real Estate?
The Buckeye State treats all capital gains as income, meaning Ohio residents may report them alongside other income for the tax year on the state’s annual income tax return. The due date for individual income taxes is typically in April. For example, during Tax Year 2022, the due date for income taxes was April 18, 2023.
Short-Term vs. Long-Term Capital Gains Tax Rate in Ohio
Ohio real estate legislation does not differentiate between short-term and long-term capital gains. The Ohio Department of Taxation treats all capital gains realized on the sale of properties in the Buckeye State as income, subjecting them to the state’s income tax schedule.
How to Avoid Capital Gains Taxes on Home Sale in Ohio
Individuals looking to sell a home in Ohio and reduce their tax liability on capital gains can use the following strategies:
Strategy #1: Federal Exclusion of Long-Term Capital Gains
According to the IRS, you can exclude up to $250,000 (or $500,000 if married and filing jointly) of the gains realized from the sale of a home, provided the home was your primary residence. You can prove your home was a primary residence by passing the ownership and use tests, which require you to pass the following:
- Ownership test: You have owned the home for at least two years before the sale. Documents such as a deed and title insurance may constitute valid proofs of ownership.
- Use test: You must show proof of occupancy, meaning you have lived in the home and used it as your primary residence for at least two years before the sale. Documents used to prove occupancy are outlined in federal proof of occupancy guidelines.
Although it is not required for the ownership and usage periods to be consecutive, you must be able to prove both ownership and use of the home within five years of the sale. Additionally, you must not have used this exclusion for another home in the last two years.
Example: Ethan is a single taxpayer owning an apartment in Cleveland, OH. Ethan initially purchased the property nine years ago for $170,000, using it as his primary residence for two separate one-year periods in the four years preceding the sale. He eventually sells it for $230,000, realizing a long-term capital gain of $60,000.
Ethan meets the ownership test, having owned the apartment for nine consecutive years. Although Ethan has not used the apartment as his primary residence for two consecutive years, he still meets the Section 121 use test because his total aggregated period of use as a primary residence is two years within the five years before the sale.
Ethan qualifies for the federal exclusion of long-term capital gains. As a single taxpayer, he can exclude up to $250,000 of capital gains realized after selling his Cleveland apartment.
Because Ethan realized a total gain of $60,000, less than the legal threshold, he can exclude 100% of his gains from the federal capital gains tax.
How to Report Your Property Sale for Taxes in North Carolina
Whether you are selling a home, condo, or apartment in the Buckeye State, you must submit the proper documentation to each taxing entity.
IRS Forms
To report the sale of your home to the IRS, you must submit two forms: IRS Schedule D (Form 1040) and IRS Form 8949.
Form 8949 requires you to report whether your gains are long-term or short-term. Short-term gains must be listed under Part I, whereas long-term gains must be listed in Part II. If you can exclude the gains you’ve realized with a specific property, enter the letter code “H” in column (f) on the line corresponding to that property, then write the corresponding adjustment amount in parentheses and as a negative in column (g).
After completing Form 8949, enter the corresponding information regarding short-term and long-term gains in IRS Schedule D (Form 1040). Part I lets you enter short-term gains, whereas Part II is for long-term gains.
Ohio Department of Taxation Tax Forms
Ohio taxpayers must report all income realized during the tax year, including capital gains, on the state’s personal income tax form: Form IT 1040.
While the form does not contain a section or line specifically for reporting capital gains, the Department of Taxation classifies them as nonbusiness income. Taxpayers can report their total taxable nonbusiness income on Line 7 of the form.
FAQs
Here are the answers to some common questions about capital gains taxes in Ohio when selling a residence.
Ohio’s real estate laws are compliant with Section 1031 of the Internal Revenue Code. If you sell a property in Ohio and realize a capital gain, federal law allows you to defer paying federal and state capital gains taxes if you reinvest the gains into a similar property under a qualifying Section 1031 like-kind exchange, also known as a 1031 exchange.
Land qualifies as a capital asset under Section 1221 of the Internal Revenue Code. Even if you sell land with no housing built on it, gains realized on the sale are capital gains. These gains are subject to the federal capital gains tax and Ohio income taxes.
With the passage of the Taxpayer Relief Act of 1997, the federal government repealed the “over-55” home sale exemption. It was replaced by the current legislation, which allows homeowners to exclude up to $250,000 (or $500,000 for married taxpayers filing jointly) of the capital gains realized on the sale of a primary residence.
They can be both, depending on your home state. In Ohio, the state government treats capital gains as income. If you sell a house, apartment, or condo in Ohio and realize a capital gain, you will pay federal capital gains tax, then count the gains as part of your income for the tax year in your state income tax return.
It varies depending on the entities collecting taxes. At the federal level, capital gains are added to your Adjusted Gross Income (AGI) after reporting the sale using IRS Schedule D (Form 1040). In Ohio, because capital gains are treated as income, the Department of Taxation collects taxes on capital gains annually as part of state income taxes.
No. According to the IRS, all capital gains are taxable. However, specific types of capital losses are deductible, such as losses realized on business and investment property. You cannot deduct losses realized on personal-use property.
Yes. In Ohio, any capital gains realized after selling any home are considered part of your taxable income, regardless of whether you sold a principal residence or a secondary home. However, secondary homes are ineligible for the federal long-term capital gain exclusion.
Capital losses are not subject to capital gains taxes. However, you can deduct them. According to federal law, you may only deduct capital losses on home sales if you used the property for investment or business purposes.
Ohio has no provisions allowing you to avoid paying capital gains taxes after a set period. The state treats capital gains as income, for which no exemptions exist.
Ohio real estate legislation does not have age-related exemptions to capital gains or income taxes.
