Ohio local income tax has been a source of confusion for workers and employers since the COVID-19 pandemic reshaped where and how people work. If you have been working from home, you may be eligible for a local tax refund, but the answer depends on where you live, where your employer is based, and how Ohio law has evolved since 2020. The interplay between municipal income tax rules, employer withholding obligations, and recent legal challenges matters for anyone looking to reduce a tax burden or recover overpaid local taxes.
Before the pandemic, the system was straightforward. Employees paid local income tax to the city or village where they physically worked, and employers withheld accordingly. Many Ohio municipalities rely heavily on this commuter-driven revenue. In Cleveland, the large majority of the city’s income tax revenue comes from people who commute into the city for work rather than from residents. The city collected roughly $410 million in income tax in 2020, with the bulk of that paid by people who work in Cleveland but live elsewhere, a figure that illustrates just how dependent large Ohio cities are on non-resident workers.
How Ohio’s COVID-19 Emergency Orders Changed Local Tax Withholding
Ohio Governor Mike DeWine issued a declaration of emergency on March 9, 2020, setting off a chain of events that disrupted the state’s municipal income tax system. The emergency declaration included health orders and guidelines that sent thousands of employees home to work remotely. Under normal Ohio law, once an employee works more than 20 days in a municipality during a calendar year, the employer must begin withholding local taxes for that jurisdiction. The 20-day standard, often called the occasional entrant rule, is codified in Ohio Revised Code Section 718.011, which governs employer withholding for work performed in a municipality.
The shift to remote work created a potential windfall for residential communities and a revenue crisis for major employment centers. If employers had been required to change withholding from the workplace city to each employee’s home municipality, workers in non-taxing or low-tax communities could have saved hundreds or even thousands of dollars per year. For cities like Cleveland, Columbus, Cincinnati, and Toledo, the lost revenue would have been devastating.
What Ohio House Bill 197 Did to Municipal Income Tax
The Ohio General Assembly moved quickly to protect city budgets. Ohio House Bill 197, approved on March 25, 2020, and signed by Governor DeWine two days later, included a critical provision in Section 29. This section required employers to continue withholding local income taxes as if employees were still physically working at their pre-pandemic office locations, regardless of where they actually performed their work.
The bill went into effect immediately and was scheduled to remain in place until 30 days after the emergency period ended. Section 29 froze each employee’s principal place of work to its location on March 9, 2020, and directed employers to disregard the 20-day rule when determining which municipality should receive withholding. In practical terms, a worker who moved to a home office in a suburb with no local income tax still had taxes withheld as though they were commuting to downtown Cleveland or Columbus every day. The worker received none of the tax savings that remote work would normally produce under Ohio’s municipal tax framework.
Legal Challenges to Ohio’s Remote Work Tax Rules
House Bill 197’s withholding mandate did not go unchallenged. The Buckeye Institute, a free-market policy organization, filed multiple lawsuits on behalf of employees who had stopped commuting to their offices in Cincinnati, Toledo, and Columbus. The core argument was straightforward: Ohio House Bill 197 is unconstitutional because it allows cities to collect income tax from people who do not live in or use the services of those municipalities.
If the legal challenges had succeeded, major Ohio cities could have been forced to refund millions of dollars in local income tax collected from remote workers. The first of these lawsuits was dismissed by a Franklin County judge, and the Buckeye Institute appealed. The lead case, Schaad v. Alder, reached the Supreme Court of Ohio, which on February 14, 2024, upheld the withholding mandate in a 5 to 2 decision. The court found that the temporary law did not violate the Due Process Clause because it involved purely intrastate taxation, and that the state had a legitimate interest in keeping municipal revenues stable during the emergency. That ruling largely settled the constitutional question in favor of the municipalities.
In a related development, the Ohio Board of Tax Appeals ruled that municipalities cannot impose income tax on the full wages of an employee who only performs a portion of their work within city limits. This ruling came in the case of a United States Postal Service worker who performed only 40 percent of her duties inside the City of Massillon, spending the remaining 60 percent delivering mail in townships that levy no municipal income tax, yet was taxed on 100 percent of her income. The board canceled the city’s assessment and reinforced the principle that Ohio municipal income tax should reflect where work is actually performed.
How to Request a Local Income Tax Refund Through RITA
For Ohio workers who believe they overpaid local income tax while working remotely, a refund process exists but comes with significant caveats. The Regional Income Tax Agency (RITA), Ohio’s largest municipal income tax collection agency, accepts refund requests for the period in question. RITA’s refund request Form 10A includes a dedicated section, identified as Section 2, for reporting days worked outside of a municipality due to COVID-19, supported by a Log of Days Out worksheet.
RITA attached a critical disclaimer: refund requests tied to remote work during the pandemic were held in a suspended status while the litigation over House Bill 197 worked through the courts. Because the Supreme Court of Ohio upheld the withholding mandate in February 2024, many of these suspended claims for work performed under Section 29 are unlikely to result in a refund. Anyone with a pending claim should confirm its current status directly with RITA or their workplace municipality before relying on a refund.
Workers who live in a city or village with no local income tax, or who live in a community that does not offer a full tax credit for amounts paid to their workplace city, had the most at stake in this dispute. The dollars involved could be substantial. An employee earning $40,000 per year, taxed at 2.5 percent by their workplace city, who worked from home for roughly 15 months in a non-taxing locality, would have had around $1,250 in workplace tax withheld over that stretch. Someone whose residential community taxes at 1 percent but allows only a partial credit could have faced a difference of several hundred dollars. Sorting out which jurisdiction is owed each dollar requires good documentation of work locations, and many filers turn to a CPA firm offering tax advisory services to prepare and support the request.
What Ohio’s Emergency Order End Date Means for Taxpayers
Governor DeWine ended Ohio’s COVID-19 state of emergency on June 18, 2021. This date is significant because House Bill 197’s withholding mandate was tied directly to the emergency period and was set to lapse 30 days after it ended. The window meant that roughly 15 months of local income tax collections were at the center of the legal battles that followed.
Going forward, employers must evaluate their withholding obligations based on where employees actually work. For companies that have adopted permanent remote or hybrid work arrangements, this means carefully tracking employee work locations to ensure correct Ohio municipal income tax withholding. Maintaining accurate payroll records across multiple jurisdictions is exactly the kind of ongoing task that client accounting services can support. Employees, in turn, should review their pay stubs and tax filings to confirm that the right municipalities are receiving their local income tax payments.
Who Should Consider Filing a Local Tax Refund Claim
Not every remote worker will benefit from filing a refund request. The strongest cases involve employees who meet specific criteria. You lived in a city or village with no local income tax during the period you worked from home. Or, your residential community imposes a lower tax rate than your workplace city and does not offer a full credit for taxes paid to other municipalities. You worked remotely for a significant portion of the emergency period, ideally most or all of the roughly 15 months between March 2020 and June 2021. Keep in mind that the Supreme Court of Ohio upheld the underlying withholding mandate in 2024, which narrows the practical odds of recovering tax withheld under Section 29.
If your residential tax rate matches or exceeds your workplace city’s rate and your community offers a full reciprocal credit, a refund claim may not produce meaningful savings. Consulting with a tax professional who understands Ohio local income tax rules is the best way to determine whether filing makes sense for your situation.
Frequently Asked Questions
Can I get a refund on Ohio local income tax if I worked from home during COVID-19?
You may have been eligible for a local income tax refund if you worked remotely during the emergency period and live in a non-taxing municipality or one with a lower rate than your workplace city. RITA held these requests in suspended status during the litigation over House Bill 197. After the Supreme Court of Ohio upheld the withholding mandate in 2024, many claims for tax withheld under that emergency law are unlikely to result in a refund, so confirm your specific situation with RITA or your workplace municipality.
What is Ohio House Bill 197 and how does it affect local income tax?
Ohio House Bill 197, signed into law on March 27, 2020, required employers to continue withholding local income taxes as though employees were working at their pre-pandemic office locations. This applied even when employees were working from home in a different municipality with a lower or zero tax rate.
How do I file for a local income tax refund in Ohio?
File a refund request using RITA’s Form 10A, which includes Section 2 specifically for reporting days worked outside your employer’s municipality due to COVID-19, along with a Log of Days Out worksheet. Be aware that RITA held pandemic-related remote work claims in suspended status during the related court cases, and the Supreme Court of Ohio’s 2024 ruling limits the prospects for claims tied to the emergency withholding law.
How much could I save on Ohio local income tax from working remotely?
The amount at stake depends on your income and the difference between your workplace city’s tax rate and your home municipality’s rate. An employee earning $40,000 per year at a 2.5 percent workplace rate who worked from a non-taxing community for 15 months would have had roughly $1,250 in workplace tax withheld over that period, though the 2024 court ruling makes recovering it through a refund unlikely.
Is Ohio House Bill 197 unconstitutional?
The Buckeye Institute argued it was, claiming the law allowed cities to tax people who did not use municipal services. After a Franklin County judge dismissed the first lawsuit, the issue reached the Supreme Court of Ohio, which on February 14, 2024, upheld the law in a 5 to 2 decision, finding the temporary measure was a constitutional exercise of the state’s power over intrastate taxation.
What happens to Ohio municipal income tax now that the emergency order has ended?
With the state of emergency ending on June 18, 2021, and the temporary mandate lapsing 30 days later, employers must base withholding on where employees actually work. Companies with remote or hybrid workforces need to track employee locations and adjust Ohio local income tax withholding accordingly.
