Understanding local tax obligations is crucial for both employers and employees. This article provides a comprehensive overview of Dayton, Ohio’s income tax, focusing on the implications for salaries and wages reported on partner letterhead.
Dayton levies a 2.5% income tax on residents and non-residents working within city limits. This includes salaries, wages, commissions, bonuses, and other compensation. This rate reflects a 0.25% increase implemented in January 2025, building upon the previous 2.25% rate. Importantly, lottery winnings, gambling income, and prizes received by residents or from events within Dayton are also subject to this tax.
Businesses operating within Dayton are required to withhold income tax from qualifying employee wages. Employers should be aware of the specific requirements for withholding and remitting these taxes to the city. A credit of up to 2.5% is available for Dayton residents who pay income tax to other municipalities. This credit helps prevent double taxation.
Dayton Income Tax: Withholding and Payment
To manage tax obligations effectively, Dayton offers online resources such as the eBill site and the Zero Withholding site. Accessing these platforms requires specific information, including:
- Federal Identification Number (FID No.)
- City of Dayton Tax ID – This unique identifier is essential for creating an eBill account. Businesses can obtain this ID by emailing their FID number, company name, contact person details, and phone number to the City of Dayton. The Tax ID will typically be provided within two business days.
- Banking Information – A voided check with bank account and routing numbers is needed for setting up electronic payments.
- Payroll Tax Details – Accurate records of the tax due, the applicable year, and the specific payment period (monthly or quarterly) are essential.
Note that payroll taxes cannot be paid by credit card or paper check. Payment must be made via ACH transfer initiated by your bank or through the eBill system.
Taxable and Non-Taxable Income in Dayton
Understanding what constitutes taxable income is vital for accurate reporting and compliance.
Taxable Income Examples:
- Salaries, wages, bonuses, commissions, and other compensation
- Stipends, tips, and sick pay
- Supplemental unemployment benefits (SUB pay)
- Retirement plan contributions (401k, 403b, 457b, etc.)
- Lottery and gambling winnings
- Net rental income
- Net profits from businesses, professions, and partnerships
- Stock options and vacation pay
- Prizes and gifts connected to employment
Non-Taxable Income Examples:
- Interest and dividend income
- Welfare and Social Security benefits
- Qualified pension plan income
- State unemployment and workers’ compensation benefits
- Life insurance proceeds and alimony
- Active duty military pay (including National Guard)
- Capital gains
- Earnings of individuals under 18 years of age (effective January 1, 2024)
- Prizes and gifts not connected to employment
- Compensatory insurance proceeds
- Patent and copyright income
This list is not exhaustive. For specific questions regarding taxable income, contact the City of Dayton Income Tax Customer Service line at 937-333-3500.
Important Considerations for OH Partners
Partners in businesses operating within Dayton should carefully review their compensation structures and ensure accurate reporting of income. Utilizing partner letterhead for salary documentation requires strict adherence to Dayton’s income tax regulations. For detailed information on recent changes and guidelines affecting withholding, consult the official document: Changes and Guidelines Affecting Withholding Resulting from OH HB5 (PDF).
Staying informed about local tax laws ensures compliance and minimizes potential financial penalties. Contact the City of Dayton for clarification on any specific tax-related questions.
