Does Ohio Tax 401(k) Withdrawals? Rates, Credits, School Tax

Yes, Ohio does tax 401(k) withdrawals from traditional accounts. Because Ohio starts its income tax calculation with your federal adjusted gross income, any distribution that is taxable federally is also taxable in Ohio. The rates are modest: the top marginal rate for tax year 2025 is 3.125%, and qualifying retirees can claim a credit worth up to $200.¹

How the Tax Flows Through

Ohio’s income tax base begins with your federal AGI.² When you take a taxable distribution from a traditional 401(k), the full amount, including both pre-tax contributions and investment earnings, appears on your federal 1040 and carries straight over to line 1 of the Ohio IT 1040. There is no separate line for retirement income on the state return.¹

One piece of good news for early withdrawals: Ohio does not add its own penalty on top of the federal 10% additional tax that applies to distributions before age 59½.³ The state taxes the distribution itself at ordinary rates and leaves penalties to the IRS.

Ohio Tax Rates on a 401(k) Withdrawal

Ohio uses progressive brackets, with the top marginal rate at 3.125% for 2025.¹ The lowest income brackets have been eliminated in recent years, so the first portion of income is effectively untaxed. Current bracket thresholds are posted on the Ohio Department of Taxation website.⁴

Your withdrawal stacks on top of other income for the year, so the state tax you pay depends on your total taxable income, not the withdrawal amount alone. Pull $30,000 from a 401(k) while earning $50,000 in wages, and Ohio taxes the combined $80,000, with the top dollars taxed at whatever marginal rate applies at that level. Spreading withdrawals across tax years can keep more of your income in the lower brackets.

The Retirement Income Credit

Ohio offers a nonrefundable credit for qualifying retirement income. To claim it, the income must be received “on account of retirement” from a pension, profit-sharing, or retirement plan, and your modified adjusted gross income minus exemptions must be under $100,000.⁵ The credit is tiered by the total amount of qualifying retirement income you receive during the year:

$500 or less: no credit
$501 to $1,500: $25
$1,501 to $3,000: $50
$3,001 to $5,000: $80
$5,001 to $8,000: $130
Over $8,000: $200

Only one credit is allowed per return, regardless of filing status.⁵

A catch worth knowing: early withdrawals do not qualify. If you take money out of a 401(k) before you actually retire, Ohio does not treat the distribution as income received “on account of retirement,” and the credit does not apply.⁶ You still owe full Ohio tax on the distribution.

Lump Sum Election

If you take an entire lump sum distribution from a 401(k) or other qualifying plan, you can elect a different credit calculation. The lump sum credit divides your total distribution by your actuarial life expectancy, runs that annual figure through the tiered schedule above, and multiplies the result by your remaining life expectancy. For a large one-time payout the result can exceed $200.⁵

The election is permanent. Once you take the lump sum credit, you cannot claim either the lump sum credit or the annual retirement income credit in any future tax year.⁵ It pays off only when the one-time credit exceeds what you would otherwise collect, year after year, from the standard credit. For retirees planning regular annual withdrawals, the annual credit usually comes out ahead.

Senior Citizen Credit

Ohio adds a separate $50 nonrefundable credit for taxpayers age 65 or older, subject to the same $100,000 modified AGI threshold. It is available on both the state IT 1040 and the school district SD 100 return, so qualifying seniors can claim it on each.⁶ A lump sum version exists too, and electing it permanently bars the standard $50 credit in future years.⁵

Withdrawals Ohio Does Not Tax

Some 401(k) transactions never reach the Ohio tax base because they are not in your federal AGI to begin with.

Rollovers. A direct rollover to another qualified plan or an IRA is not a taxable event. An indirect rollover is also tax-free if you redeposit the funds within 60 days and the amount is not reported as taxable on your federal return.⁷ Miss the 60-day window and the full amount becomes taxable on both returns.

Qualified Roth 401(k) distributions. Withdrawals from a Roth 401(k) are tax-free at both the federal and state levels when the account has been open at least five tax years and the withdrawal occurs after age 59½, disability, or death.⁸

401(k) loans. Borrowing from your own account is not taxable as long as you follow the repayment terms. If the loan defaults, the plan administrator reports the outstanding balance as a deemed distribution on Form 1099-R, and Ohio taxes it like any other withdrawal.⁹

Military retirement pay is a separate category: Ohio fully excludes it from state income tax, including payments to the uniformed services, reserves, and Ohio National Guard, as well as survivor benefit plan payments to a surviving spouse.² But if military pay was rolled into a 401(k), later withdrawals are treated as ordinary 401(k) distributions and do not keep the military exclusion.

School District Income Tax

State tax is not the whole bill. More than 200 Ohio school districts impose their own income tax, and whether your 401(k) withdrawal is subject to it depends on the district’s tax base.¹⁰

Traditional tax base districts tax your modified AGI minus exemptions. Retirement distributions, including 401(k) withdrawals, are included.
Earned income tax base districts tax only wages and self-employment income. Retirement distributions are not taxed.

You can look up your district and its tax type on the Department of Taxation site. If you live in a traditional-base district, your 401(k) withdrawal effectively gets taxed at both the state and local levels. The $50 senior citizen credit is also available on the SD 100, which offsets a small portion of the local bill for taxpayers 65 and older.⁶

Withholding and Estimated Payments

Ohio does not require mandatory state withholding on 401(k) distributions the way the federal government does. Retirees who take large withdrawals without arranging state withholding can end up owing a sizable amount at filing time, along with an interest penalty for underpayment.

Two ways to handle it. You can file Ohio form IT 4P with your plan administrator to set up voluntary state withholding on each distribution. Or you can make quarterly estimated payments to the Ohio Department of Taxation, due April 15, June 15, September 15, and January 15 of the following year.¹¹ For most retirees, withholding at the source is simpler than tracking four payments a year.

1
Ohio Department of Taxation. Ohio Individual Income Tax Return Booklet IT 1040
2
Ohio Legislative Service Commission. Ohio Revised Code 5747.01 – Income Tax Definitions
3
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
4
Ohio Department of Taxation. Annual Tax Rates
5
Ohio Legislative Service Commission. Ohio Code 5747.055 – Tax Credit for Retirement Income
6
Ohio Department of Taxation. Income – Retirement Income
7
Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement
8
Internal Revenue Service. Retirement Topics – Designated Roth Account
9
Internal Revenue Service. Fixing Common Plan Mistakes – Plan Loan Failures and Deemed Distributions
10
Ohio Department of Taxation. School District Income Tax
11
Ohio Department of Taxation. Estimated Payments