Ohio for retirees: Social Security untaxed, pensions taxed, and the credits that stand in

A retiree moving to Ohio from Illinois or Pennsylvania expects retirement income to come off the state return. Here only some of it does. Social Security, tier I railroad retirement and uniformed services retired pay are deducted on the Ohio Schedule of Adjustments, at any age and in any amount. Pensions, including OPERS, STRS and SERS, traditional IRA withdrawals, 401(k) and 403(b) distributions, annuity payments and Roth conversions stay in Ohio income and are taxed like wages: zero on the first $26,050 of Ohio taxable income and 2.75% above it. In place of an exclusion Ohio offers two small credits, a retirement income credit worth $25 to $200 and a $50 senior citizen credit at 65, both cut off once modified AGI less exemptions reaches $100,000. The $6,000 federal senior deduction never reaches the Ohio return. And if you live in one of the 210 school districts with an income tax on the “traditional” base, your pension is taxed a second time, at up to 2%.

The arithmetic is gentler than it sounds. Because Ohio starts from federal AGI, only the federally taxable part of Social Security was ever in the number, and that part comes out. A couple with $40,000 of pensions and $36,000 of Social Security has $40,000 of Ohio AGI, two exemptions of $2,400, and a tax base of $35,200, so the Ohio tax before credits is about $585 and after the retirement and senior credits about $335. The pain comes higher up: a single retiree with an $80,000 pension and a $30,000 IRA withdrawal pays roughly $2,600 and loses both credits.

What comes off, and what stays

Line numbers are from the 2025 Schedule of Adjustments. Pensions earned in another state are taxed by Ohio once you live here; federal law bars the former state from following them.

The credits that stand in for an exclusion

Three credits on the Ohio Schedule of Credits are aimed at retirees. All are nonrefundable and all require modified adjusted gross income less exemptions under $100,000. Modified AGI is Ohio AGI with the business income deduction added back, so a retiree with a rental or a K-1 cannot use that deduction to get under the line.

Retirement income credit. Based on the total pension, IRA and 401(k) income included in Ohio AGI for both spouses, from a table in the instructions: $25 for retirement income of $501 to $1,500, rising in steps to $200 once retirement income passes $8,000. The maximum is $200 per return, joint or single, and it is reached by almost everyone who has a pension at all. Early distributions do not count toward it.

Senior citizen credit. $50 per return for anyone 65 or older at the end of the year. One credit per return, not per spouse. A separate $50 senior citizen credit applies on the school district return.

Lump sum credits. A retiree who takes a total distribution of a plan in one year, box 2b checked on the 1099-R, can elect a one-time lump sum retirement credit in place of the retirement income credit, or a lump sum distribution credit in place of the senior credit. Both are figured by worksheet from the number of years of life expectancy and the $200 or $50 that would otherwise be claimed, and once taken, the regular credit is gone for every future year. For most people the regular $200 a year is worth more than the one-time amount.

Retired couples should also look at the joint filing credit, 5% to 20% of tax up to $650, but it needs $500 of “qualifying income” from each spouse, and Social Security, railroad and military retired pay do not qualify. A couple where one spouse has a pension and the other only Social Security gets nothing from it. A couple where each has a pension or IRA withdrawal does.

Roth conversions: 2.75% plus the cliffs

A Roth conversion is taxed by Ohio in the year of the conversion, because it is taxed federally and Ohio starts from federal AGI. The Department’s FAQ is explicit: a rollover that creates federal income, such as converting to a Roth, is taxable in Ohio. The headline cost is 2.75% of the amount converted. The real cost is often higher, because the conversion raises modified AGI, and modified AGI drives four things at once: the exemption tier, the retirement income credit, the senior credit, and the joint filing credit tier.

Take the couple above and add a $50,000 conversion. Ohio AGI goes from $58,000 to $108,000. Their exemptions fall from $2,150 to $1,900 each. Modified AGI less exemptions is now $104,200, over $100,000, so the $200 retirement credit and the $50 senior credit are gone. The joint filing credit drops to the 5% tier. Ohio tax becomes $332 + 2.75% × ($104,200 − $26,050) = $2,481, less a $124 joint filing credit, or $2,357; the school district tax rises to $992. The two together go from $1,245 to $3,349. The $50,000 conversion cost $2,104 of Ohio and school district tax, 4.2%, not 2.75%. Convert in smaller pieces that keep modified AGI less exemptions under $100,000 and the credits survive.

The federal side still matters more: a conversion can raise Medicare premiums two years later through IRMAA and make more Social Security taxable. Ohio’s contribution is the second layer. Once converted, qualified Roth withdrawals are never in federal AGI and so never taxed by Ohio or by a school district.

The federal senior deduction and the Ohio return

The $6,000 federal deduction for people 65 and older, in effect for 2025 through 2028, comes off after adjusted gross income, alongside the standard deduction. Ohio starts from AGI, so it never arrives, and no add-back is needed because nothing was taken out. The extra federal standard deduction for age is invisible here for the same reason. Ohio adopted the 2025 federal act into its code in March 2026 (Senate Bill 9), and that changed nothing for these items either; below-the-line deductions are below the line in Ohio too. What Ohio gives seniors instead is the $50 credit, the retirement income credit, and a medical deduction that is friendlier than the federal one.

The medical deduction nobody uses

Ohio lets anyone, itemizer or not, deduct unreimbursed medical expenses above 7.5% of federal AGI plus, with no floor at all, health, dental, vision and long-term care insurance premiums paid with after-tax dollars. For a retiree that means Medicare Part B and Part D premiums, a Medigap or Advantage plan premium, dental and vision coverage, and long-term care insurance. A couple paying $4,200 of Part B, $1,800 of Medigap and $3,000 of long-term care premiums takes $9,000 off Ohio AGI on line 44 of the Schedule of Adjustments, worth about $250 of Ohio tax and $90 of school district tax at 1%. The federal return gives them nothing for it unless they itemize and clear 7.5% of AGI. Ask for the Ohio Unreimbursed Medical Care Expense Worksheet; it is where the premiums go.

Withholding and estimated payments

OPERS, STRS and SERS will withhold Ohio and school district tax if you ask. Private pension plans and IRA custodians generally will not, and are not required to until 2027, when HB 96 lets a retiree demand Ohio withholding from a private plan. Nobody withholds Ohio tax on interest, dividends or a stock sale. So the retiree who owes more than $500 for the year after credits must make four estimated payments, due April 15, June 15, September 15 and January 15, or pay an interest penalty on Form IT/SD 2210. The safe harbor is 90% of this year’s tax or 100% of last year’s. The 2026 withholding tables were not revised for the 2.75% rate until August 1, 2026, so a retiree whose public pension was withheld all year may see a larger refund than expected.

Property tax relief: the homestead exemption

Nothing about property tax appears on the IT 1040. Ohio’s relief for seniors is the homestead exemption, applied for once at the county auditor on Form DTE 105A, which removes $29,700 of market value from the tax bill for tax year 2026 (bills paid in 2027), for owner-occupants 65 or older, or permanently disabled, whose Ohio modified AGI is $41,000 or less (confirm the tax year 2026 limit with the county auditor). The 2025 figures were $29,000 and $40,000; both are indexed. A surviving spouse who was at least 59 at the owner’s death keeps it. Disabled veterans with a 100% service-connected rating and surviving spouses of first responders killed in the line of duty get an enhanced exemption of $59,400 with no income test (Form DTE 105I or 105K). The income test uses Ohio AGI plus the business income deduction, so a retiree’s pension counts against it but Social Security does not. Applications for real property are due December 31 of the year claimed, and once granted the exemption continues without reapplying; the auditor mails a continuing form each January to be returned only if something changed. Anyone who had the exemption before the income test arrived in 2014 keeps it regardless of income and can carry that status to a new home with Form DTE 105G.

Separately, every owner-occupied home gets the owner-occupancy credit, 2.5% of certain levies for years and rising to 5.70% on 2026 bills under the property tax bills signed in December 2025; it is applied by the auditor and needs a one-time application if the home was bought recently. Ohio has no senior assessment freeze and no renter’s credit.

Moving in, moving out

Federal law since 1996 bars a state from taxing the retirement income of someone who no longer lives there. A pension earned in Pennsylvania and paid to a new Ohio resident is Ohio’s to tax, and Ohio taxes it. The reverse is also true: an Ohioan who retires to Florida stops paying Ohio tax on the OPERS pension the day Florida becomes home, and OPERS will stop withholding when told. The move-year return is a part-year return with the nonresident credit on Form IT NRC, and pension payments are allocated by where you lived on the date each was received. Snowbirds should know that Ohio presumes anyone with an Ohio home is a resident, and that spending winters away does not make a part-year resident of someone whose domicile stays in Ohio; see Moving to Ohio.