Taxes in Cleveland and surrounding suburbs- how bad are they? (Wilson: sales, to rent)

[Hop_Wilson]

I recently applied for a job in Cleveland, so I have been researching the city in case I actually get an offer and have to relocate.

My initial impressions of Cleveland are generally positive, but from what I've gathered taxes are high, and complicated. If you live in a suburb, but work in the city, you have to pay taxes for both?

For some perspective, my tax rate the last few years has been zero - I have been in grad school, so my income has been modest, to put it mildly. I've been able to deduct all my tuition and whatnot, so I haven't been paying any federal taxes recently. And I've been living in Texas, which lacks a state income tax. (Sales tax is 8.25%.)

Texas tends to make up for the lack of a state income tax with significantly higher property taxes, but since I've been a poor student I've been renting and I haven't had to worry about those, either. I would like to own a home someday, but if I move to Cleveland I'll be renting for a few years first. I'm single, no kids, so I'm not worried about the schools or anything at present. I would want to rent there first and get a feel for the neighborhoods before I bought a house, anyway.

So, can you give me some ballpark figures about taxes in Cleveland and/or the associated suburbs if I was making, say, $40,000 a year (just for illustrative purposes, and to make the math easier)? I am curious what my standard of living will be like when I actually have an income again, but I also face city, county, and state taxes. I'd be going from not really having to worry about it at all the past few years, to having taxes potentially taking a significant chunk of my income.

[hensleya1]

Hi Hop_Wilson--

I'm not a Cleveland native so I'm sure they'll chime in before long.

But Cleveland is one of the most highly taxed areas in the state. Cuyahoga County charges 7.75% sales tax in addition to state income taxes (up to 6% depending on income). Also Cuyahoga has the highest property tax rates in the entire state - if you look through their smoke and mirrors game with regards to property taxes, expect to pay 3-4% of the house's value in property taxes each year. Plus, if you live OR work in the city, you pay city taxes. You'll pay the local municipality's income tax, and then the balance of the work city's income tax goes to them, as well.

Find out exactly where the job is located - income taxes vary by municipality, but if you live outside city limits - in a township - then Ohio law says they cannot levy an income tax. Which would go miles towards your standard living.

[Cleveland_Collector]

Eh, no matter where you live, you'll pay one way or another whether it be in high municipal fees for services or, worse yet, no services at all.

I can break it down fairly simply for a salaried homeowner with a mortgage. Income is around $100k:

State income tax: approximately 3% after deductions (about the same as federal deductions)
Municipal tax: approximately 2% (no deductions)
Sales tax: 7.75% on non-food or prescription drug items (can be deducted)
Property tax: approximately 2% of assessed home/property value (can be deducted)

All tolled, federal, state, local, and property taxes will be around 30% of your gross.

When I worked in NY state, the taxes were considerably higher even though they had no municipal tax. The state tax was simply much higher (about 6.5%) as was the sales tax (8.5%) and property tax (about 5%). It was about 35% of my gross. Typically, Ohio is seen as middle of the road tax-wise. Services are generally seen as being good, even in less affluent areas.

If you make around $40k, your federal and state taxes will be lower. Everything else will be about the same. I would anticipate that your taxes would be about 25% of your gross income.

[Hop_Wilson]

Thanks! I just needed some ballpark figures about what to expect, and this helps a lot.

[Cleveland_Collector]

No problem... happy to help. Just for the record also, municipal and county taxes are generally combined. We have an entity called RITA (Regional Income Tax Agency) which covers a fair amount of the state. All local taxes go to them (if you live and/or work in a RITA community -- you probably will). Generally, the amount will be 2% and it can be deducted right from your pay. Any adjustments are made at filing time.

[Peregrine]

On one of those Forbes lists recently as "worst taxed states", Ohio didn't even make the top ten.

But it really is all relative. As CLE_COL said, those states with "low taxes" always get theirs somehow.