Ohio Capital Gains Tax on Real Estate

By Skyline Capital Investments · Updated October 26, 2026 · 7 min read

Does Ohio have a capital gains tax?

Ohio capital gains tax on real estate is the state income tax applied to your gain; there is no lower rate for long-term gains. For tax years beginning in 2026, House Bill 96 (2025) finished Ohio’s move to a flat tax: income above $26,050 is taxed at 2.75%, under Ohio Revised Code 5747.02(A)(3)(c).

That is low by national standards. A seller with a $1 million gain on a Columbus or Cincinnati building owes Ohio about $27,500 at 2.75%, compared with $99,000 at Oregon’s 9.9% top rate. The bigger Ohio question is not the rate but which bucket the gain falls into, because Ohio taxes business income and nonbusiness income differently.

Ohio income tax rates for 2025 and 2026

Ohio cut its top rate twice in two years. The table shows the schedule in the statute for 2025 and for 2026 and later years.

• The 2024 top rate was 3.5%, so a building sold in 2026 is taxed at a lower Ohio rate than one sold two years earlier.
• Short-term and long-term gains are taxed alike in Ohio. The one-year holding period matters only on your federal return.

Business income or nonbusiness income: why it matters

Ohio taxes business income at a flat 3% after letting each return deduct the first $250,000 of it ($125,000 for each spouse filing separately). Nonbusiness income gets no deduction but is taxed at 2.75%. Which one your gain is depends on facts, not on a form you choose.

Under ORC 5747.01(B), gain from real property is business income if buying, renting, managing and selling the property are integral parts of your regular trade or business. The definition of nonbusiness income in 5747.01(C) lists rents and capital gains as items that may fall on that side. An owner who runs a portfolio of apartment buildings through an operating company has a stronger case for business income than someone who owns one building as a passive investment.

For a large gain the difference can run either way. A $1,180,000 gain taxed as nonbusiness income costs $32,450 at 2.75%. The same gain treated as business income costs $27,900: the first $250,000 is deducted and the remaining $930,000 is taxed at 3%. If you have other business income that already uses the deduction, the answer flips. Ohio also has special rules for sales of ownership interests: they count as business income only if the sale is treated as an asset sale for federal purposes or you materially participated in the business in the sale year or any of the five years before.

How Ohio and federal capital gains tax stack

Your Ohio tax is added to your federal tax, and the federal side is by far the larger bill. Federal long-term gain is taxed at 0%, 15% or 20%, and IRS Revenue Procedure 2025-32 sets the 2026 point where 20% begins at $613,700 of taxable income for a joint return and $545,500 for a single filer.

The part of the gain that equals depreciation you took is unrecaptured Section 1250 gain, taxed federally at up to 25%. The 3.8% net investment income tax applies to the lesser of your net investment income or the amount by which modified adjusted gross income passes $250,000 on a joint return or $200,000 for a single filer.

Because Ohio starts from federal adjusted gross income, the same gain shows up on both returns. Ohio does not have a separate surtax on investment income, but residents of many school districts owe one more local tax on top, covered next.

Ohio school district income tax on a sale

If you live in an Ohio school district that levies an income tax on the traditional base, your gain is taxed by the district as well. Ohio’s 2025 list of school districts shows rates from 0.50% to 2.00%, and the tax is filed on Form SD 100.

The base matters. A traditional-base district taxes income built from modified adjusted gross income, which includes capital gains. An earned-income district taxes only wages and self-employment income, so a building sale adds nothing. Look up your district number and its base on the Department of Taxation’s list before you estimate the tax. As a rule of thumb, each 1% of traditional-base school district tax costs $11,800 on a $1,180,000 gain.

Selling Ohio property as a nonresident or through an LLC

A nonresident owes Ohio tax on the gain from Ohio real estate, because ORC 5747.20(B)(2)(a) allocates capital gains from real property located in Ohio to Ohio. A seller living in Indiana or Florida who sells a Dayton building files an Ohio nonresident return for the year of the sale.

Many Ohio apartment buildings are owned by an LLC taxed as a partnership. In that case the entity itself may owe Ohio withholding tax on the share of income that belongs to each nonresident individual member. ORC 5747.41 sets that withholding at the 3% rate Ohio applies to taxable business income. Ask your CPA early whether the entity will file a composite or withholding return for the sale year, so the members’ estimated payments line up with what the entity pays.

Depreciation recapture in Ohio

Ohio taxes depreciation recapture at the same rate as the rest of the gain, 2.75% as nonbusiness income or 3% as business income. There is no Ohio version of the federal 25% rate on unrecaptured Section 1250 gain, so the split matters only on the federal return.

Ohio does change the depreciation you can take. Under ORC 5747.01(A)(17) and (18), Ohio adds back five-sixths of federal bonus depreciation and excess Section 179 expense in the year you claim it, then lets you deduct the add-back over the next five years. In some cases the add-back is two-thirds, deducted over two years. If you used a cost segregation study and bonus depreciation, your Ohio depreciation history differs from your federal one. Keep the add-back schedule, since any part not yet deducted when you sell affects your Ohio gain.

Ohio adopted the Internal Revenue Code as it stood on March 5, 2026, through Senate Bill 9, so federal changes through that date flow into Ohio income except where Ohio law says otherwise, as it does for bonus depreciation.

Worked example: selling a $2M apartment building in Ohio

A married couple filing jointly sells a 24-unit building in Columbus for $2,000,000 and pays $120,000 in selling costs, so the amount realized is $1,880,000. They paid $1,000,000 for it and have taken $300,000 of depreciation, so their adjusted basis is $700,000 and their gain is $1,180,000. That is $300,000 of unrecaptured Section 1250 gain and $880,000 of long-term capital gain. They have $200,000 of other taxable income and a $850,000 mortgage on the building.

Federal tax: the $300,000 of Section 1250 gain is figured here at the 25% maximum, $75,000. The $880,000 of capital gain stacks on $500,000 of income, so $113,700 falls below the $613,700 line and is taxed at 15% ($17,055), and $766,300 is taxed at 20% ($153,260). Their MAGI rises to $1,380,000, so the 3.8% NIIT applies to $1,130,000, or $42,940. Federal total: $288,255.

Ohio tax, treating the gain as nonbusiness income: their income is already above $26,050, so all $1,180,000 is taxed at 2.75%, which is $32,450. Combined tax is $320,705, about 27% of the gain. After paying off the loan, the couple nets $1,030,000 before tax and about $709,295 after. If the gain were business income instead, Ohio tax would be $27,900. If they live in a traditional-base school district, add $11,800 for each 1% of district rate.

How a 1031 exchange changes the Ohio tax

A valid 1031 exchange defers the Ohio tax along with the federal tax, because Ohio starts from federal adjusted gross income and deferred gain never reaches it. In the example, buying a replacement worth at least $1,880,000 and reinvesting all $1,030,000 of net cash would push the full $320,705 into the future.

Ohio is not one of the states that track gain after you leave. California, Massachusetts, Montana and Oregon do, but Ohio sellers who exchange into Texas, Florida or Indiana have no Ohio filing to keep up each year. Cash you keep is boot and is taxed by both governments. Our page on the 1031 exchange in Ohio covers the state side in detail, and the 1031 exchange calculator runs the federal numbers for your own sale.

Other costs of selling in Ohio

Income tax is not the only charge on an Ohio sale. When the deed is filed, the county auditor collects a conveyance fee of 1 mill, or $1 per $1,000 of value, under ORC 319.54(G)(3), and the county may add a real property transfer tax of up to 3 mills under ORC 322.02. The total can reach $4 per $1,000. On a $2,000,000 sale that is up to $8,000. ORC 322.02 puts the tax on the grantor, the seller, though a purchase contract can shift the cost.

Ohio sellers also have fewer tools to soften the state tax than sellers in high-tax states, because the rate is already low. The main options are the same as anywhere: an exchange, an installment sale that spreads the gain over several years, or holding the building so heirs receive a stepped-up basis.

Selling an Ohio apartment building

Skyline buys apartment buildings with five or more units in Ohio, from Columbus, Cincinnati and Cleveland to Dayton, Toledo and Akron. We buy directly, close on your timeline, and can work inside 1031 deadlines. If you plan an exchange, we can set a closing date that leaves you time to line up the replacement and we work with your intermediary on the assignment.

For the annual carrying cost a buyer will look at, see our page on the property tax rate in Ohio, and for the tenant rules that come with the building, Ohio landlord-tenant law for apartment owners.