Cleveland Municipal Income Tax and RITA Filing

Ohio's unique system

How does the Ohio municipal tax credit system work?

Ohio has nearly 600 municipalities that levy an income tax, which creates a potential double-tax problem for commuters. If you live in Parma (which has its own municipal tax) and work in Cleveland, both cities want to tax your wages. Ohio law addresses this through a credit system — but the specifics depend on your home city's policies.

Here is how the credit typically works:

1. Your employer withholds Cleveland's 2.5% from your paycheck because that is where you work.
2. Your home city also wants to tax your income at its own rate.
3. Your home city may give you a credit for the taxes paid to Cleveland, reducing or eliminating your home-city liability.

Important: the credit only goes one direction. Cleveland does not reduce its 2.5% rate because you also owe tax to your home city. You always pay the full workplace rate. The credit, if any, comes from your home city.

What is RITA and how does filing work?

RITA (Regional Income Tax Agency) is a centralized agency that administers municipal income tax collection for hundreds of Ohio municipalities. Cleveland is one of its members. RITA provides:

• A single filing portal at ritaohio.com where you can file returns for multiple municipalities.
• Credit calculations between your work city and home city.
• Employer registration for withholding.
• Refund processing.

Not all Ohio cities use RITA. Some use CCA (Central Collection Agency) or administer taxes themselves. If your home city uses a different administrator, you may need to file separate returns with each agency.

What does a Cleveland worker's total tax picture look like?

Worked example: $70,000 salary, single filer, Cleveland resident

Illustrative example. Ohio state brackets are graduated (0%–3.5%); Cleveland's rate is flat. Use our Ohio take-home calculator for a personalized estimate.

What about remote workers after the pandemic rules ended?

During 2020–2021, Ohio passed temporary legislation (HB 197) allowing employers to continue withholding municipal tax based on the office location even when employees worked from home. This meant remote workers in the suburbs were still paying Cleveland's 2.5% rate as if they commuted.

That temporary provision has expired. Under permanent Ohio law (ORC 718), municipal income tax is generally based on where the work is physically performed. If you now work from home in a suburb full-time and never go to the Cleveland office, your home city is the proper taxing municipality for those wages, not Cleveland.

If your employer continues to withhold Cleveland tax on remote-work days, you can file for a refund of the over-withholding through RITA and pay the tax to your home municipality instead. Keep a log of which days you work in Cleveland vs. from home to support your allocation.

What income does Cleveland exempt from municipal tax?

Cleveland's municipal tax applies only to earned income. Several important categories are fully exempt:

• Interest and dividends — not subject to Cleveland municipal tax
• Capital gains — not taxable at the municipal level in Ohio
• Social Security and pensions — fully exempt
• Rental income — generally exempt (unless actively managed as a business)
• Unemployment compensation — exempt

This is narrower than federal or Ohio state income tax. A retiree living in Cleveland whose only income is a pension and Social Security owes zero Cleveland municipal tax. Only wages, salaries, commissions, bonuses and net self-employment income are subject to the 2.5% rate.

What if your employer withholds for the wrong Ohio city?

This is surprisingly common in Ohio, where nearly 600 municipalities have an income tax. If your employer withholds tax for the wrong city — for example, withholding for their corporate headquarters city rather than the city where you actually work — you need to sort it out through the filing process:

1. Notify your employer's payroll department and request they update the withholding municipality.
2. File a return with the city that was incorrectly withheld and claim a refund.
3. File a return with the correct city (Cleveland if that is where you work) and pay the tax owed.
4. The credit system will reconcile the payments between your work city and home city on your annual return.

This usually resolves on the annual return, but correcting the withholding mid-year prevents you from having a large balance due or waiting months for a refund.