Understanding the Impact of Ohio Tax Laws on Wealth Management

Are you aware of recent and upcoming changes to Ohio’s tax laws? These shifts may significantly impact your strategy for wealth management in Ohio. What should you expect from Amended House Bill 33? 

What do the new and previous changes mean for your financial strategy? Our firm’s team at Lakehouse Family Wealth consistently works with attorneys who understand financial matters. Together, we broke down how the new and current tax laws might influence your asset management strategy.   

How Tax Laws Influence Personal Income Tax

First, examine how the new tax laws could affect your personal income. Your income sources may include:

• Regular employment
• Passive income sources like property rentals                                                                 
• Profits from investments and shares 
• Social security withdrawal 
• Company equity interests 

Essentially, earning money from any activity counts as part of your income. Therefore, you pay a tax on your total annual income sources called a personal income tax. Learn whether you’ll notice these changes reflected in your tax payments below. 

Bracket Reductions

One main Ohio tax law change involves limiting the state’s defined tax brackets. Tax brackets identify various personal income ranges and the rates at which the government taxes the applicable earners. The Ohio government adjusted income tax rates by eliminating one of its four income tax brackets. 

The taxation rates for the highest and lowest income brackets diminished. Thus, the 2023 brackets and tax rates appear as follows:

• Income above $155,300 owes $2,958.58, and 3.75% of the total income.
• Income at or below $115,300 but not under $100,000 pays $2,394.32, with 3.688% of the total income exceeding $100,000. 
• Income exceeding $26,050 that meets or falls below $100,000 owes $360.69 in addition to 2.75% of any amount above $26,050. 

Changes will continue into 2024, with the two higher income brackets fused into a single bracket. Personal incomes over $100,000 will owe $2,394.32 in addition to 3.5% of any income over $100,000. These changes reflect an effort to consolidate tax collection through 2025. 

Home Ownership Savings Accounts

The Ohio State government aims to stimulate homeownership interests among state residents via a significant tax deduction for contributions to homeownership savings accounts. Starting January 1st, 2024, you can take advantage of this deduction. If you file taxes alone, deposit up to $5,000. If you file jointly with a spouse, you must contribute up to $10,000 between the two of you. 

Some added benefits of earmarking income for opening a homeownership savings account include:

• Above-market interest rates from any financial institution participating in the program
• Contributions from participating employers

If you remove any earmarked savings from this account for other purposes, you will incur state income tax rates accordingly. 

The Significance of Estate Taxes on Wealth Management

In 2013, the Ohio State government repealed estate taxes, influencing how residents managed their assets and legacy following their deaths. A government collects an estate tax following a person's death and before the inheritance transfers to any loved ones named in the estate holder’s will. Previously, Ohio allowed a beneficiary to file an estate tax return within nine months after the benefactor's death. 

Below, you will learn more about how this repeal applies to your estate and wealth management in Ohio. 

What Is an Estate Tax?

Before a person passes away, they typically name one or many beneficiaries in their will and life insurance policy. These beneficiaries will receive the estate and other assets after their passing. The federal and many state governments take a portion of that income as taxes. 

The amount typically depends on the consolidated worth of the benefits and varies from state to state. Since the Ohio government eliminated estate and gift taxes, you no longer have to plan your benefits around its estate tax. However, you should still consider other government filings. 

How Does It Affect You

While you don’t have to worry about Ohio claiming part of your estate in taxes, you should still consider the federal government and other local estate tax laws. The federal government still requires a percentage of the estate from its beneficiaries. Federal estate taxes can change yearly, depending on your estate worth and any recent laws passed. 

Additionally, you might have beneficiaries living in other states. For example, you wrote a beneficiary living in a southeastern state into your will. Their state government could require a portion of the benefits even if they come from out-of-state. 

Similarly, as a potential beneficiary, you may owe estate taxes if the benefactor was a resident of a different state. Pennsylvania, another example, requires heirs in other states to pay an estate tax to its government. Taxation and law differences make wealth management cross municipal and state borders. 

What the Laws Mean for Wealth Management in Ohio

Ohio’s bracket reductions mean many people may save money when filing and paying state taxes. If you reap significant benefits from these changes, you might explore secure investment methods to help increase your money either passively or actively. 

Remain vigilant of the changes in 2024. Seek advice from a trusted tax planning service provider to identify ways you may grow your wealth. 

The deductions for holders of home ownership savings accounts represent a unique opportunity to build your legacy and estate further — especially if you currently own no property. The account and all it encompasses offer an added avenue for your loved one’s future stability and financial security. 

Finally, ensure you fully understand the implications of estate taxes in Ohio and other jurisdictions. Whether you recently inherited an estate or intend to solidify your will, you must understand how federal and state taxes will influence your assets altogether. Although Ohio requires no taxable contributions, other municipalities do. 

Lakehouse Family Wealth Helps You Manage Your Assets Accordingly

Lakehouse Family Wealth’s well-rounded team of experienced financial professionals is ready to help you build a stable financial foundation. We understand that wealth management in Ohio requires personalized solutions and services that consider your unique assets and capabilities. Contact us for a free financial assessment.