Understanding Tax Obligations (CLE, OH)

[Jhamari Hogan]

Hello, I live in a Columbus, OH suburb and want to buy an investment property in Cleveland, OH.
I pay local taxes in the city that I work in, as well as the city in which I live. From online research, I was able to find out that other cities in Ohio tax all your income (w2 & rental income) if you own a property there & some give you a small credit for taxes paid to other cities.

My question is, if I buy a property in Cleveland (or a CLE suburb), would my w2 income be taxable in Cleveland (or a CLE suburb)?
If so, how do I get around this or at least make it to where only the rental income from the property is taxable locally? Would I achieve this if I transfer the property to an llc after buying it?
Would it be better to just try investing in a different states than the one I live in?

[Benjamin Weinhart]

Hi Jhamari, I specialize in Ohio taxation (as I live here). Ohio locality can be different depending on which locality we're talking about as some tax based on income and others based on residence (I wouldn't be surprised if there was a 3rd factor as well in some niche cases). I believe both Columbus and CCA tax off of income so the income wouldn't be includable on the return where it's not present (100% apportionment to CCA).

It's very important to note that not all jurisdictions in Ohio tax at the local level and there's not a ton of rhyme or reason as to why outside of bigger localities being more likely to do it usually. A good amount of municipalities tax under either RITA or CCA to ease the burden on the taxpayer, but with many you have to file separately. Consider CCA as "Cleveland" and RITA as many other parts of the state if it helps.

Look up where a specific address falls under here: https://tax.ohio.gov/help-center/the-finder/the-finder (use the municipal tax button)

This is something I help my clients through all the time as it really is a case-by-case basis in many ways. Ohio also has a couple of other special rules such as the CAT tax and a funky bonus depreciation treatment. For these reasons, plus a few others, Ohio is the one state (some parts of KY and MI too) where I'd recommend speaking to a tax accountant specializing in the state. I have seen many tax returns where the local taxes were filed incorrectly in the past (or not at all) which caused undue penalties/interest for the taxpayer.