Can some explain RITA to me? (Cleveland, Lakewood: real estate, to rent, credit)

[Katbat789]

I’m new to the area and soooo confused about Rita. Is this the same as city tax? Or do you pay Rita and city taxes for the cities that use Rita(I’ve noticed that not every city uses Rita).


Is it better to find a place to rent in an area that doesn’t fall under Rita or does that not matter? do people who fall under Rita end up paying more in taxes compared to people who live in cities that don’t use Rita?

Sorry Ohio, but this Rita chick is a huge pain in the ass

[adam36]

You pay federal income tax. You pay state income tax. The municipality in which you work takes income tax out of your wages. Then you file RITA. If you live in a different municipality than the one in which you work, you may also owe some money to RITA. In short, I think the worst case scenario is about $1600/100k in earnings. Not a fun amount, but it's good have a ballpark estimate in advance...

[WRnative]

Ohio has municipal income taxes. In Greater Cleveland, there are two municipal income taxing agencies -- RITA and CCA.

If you work in the same community that you live, you are subject to income tax in that community, and your employer likely withholds your municipal income taxes. You still may have to file annually, depending upon the local ordinance; most cities now require everybody to file a municipal income tax return.

If you live in one community and work in another taxing community, you also are subject to an additional residential income tax. Most communities offer residential income tax credit, subject to some percentage of the income tax rate in your work community, but also subject to a limit. You may have to file both CCA and RITA tax returns if a different tax agency represents your work and residential community.

E.g., if you work in Cleveland, but live in Cleveland Hts., as I read this table, CH offers a 50 percent credit of your work community's tax rate, but caps the credit at 1 percent. As the CH tax rate is 2.25 percent, you would pay an extra 1.25 percent residential tax in CH.

https://www.ritaohio.com/TaxRatesTable

If you lived in Mentor with a 100 percent credit, and a limit equal to Mentor's tax rate, you would pay no residential municipal income tax.

It's a pain, but it offsets the lower property tax values (reflecting relatively low home prices) in Greater Cleveland, and generally enables higher service levels than in many other states.

Here are CCA community tax rates.

http://ccatax.ci.cleveland.oh.us/?p=taxrates

Unlike in some U.S. cities, Ohio cities tax only earned income, business income, and, sometimes, lottery winnings (check the local city municipal income ordinance if the latter is a concern).

The only way to avoid paying a municipal income tax in Greater Cleveland is to live and work in a township, as townships can't collect municipal income taxes (they likely have higher real estate taxes). Most functioning townships are in counties outside of Cuyahoga County. Check Wikipedia for each county. Chagrin Falls and Olmsted Townships are the only functioning townships in Cuyahoga County (every city in Ohio is in a non-functioning paper township as it relates to that city; incorporating a city or village carves them out from their township).

https://en.wikipedia.org/wiki/Cuyahoga_County,_Ohio

[Katbat789]

Originally Posted by WRnative

Ohio has municipal income taxes. In Greater Cleveland, there are two municipal income taxing agencies -- RITA and CCA.

If you work in the same community that you live, you are subject to income tax in that community, and your employer likely withholds your municipal income taxes. You still may have to file annually, depending upon the local ordinance; most cities now require everybody to file a municipal income tax return.

If you live in one community and work in another taxing community, you also are subject to an additional residential income tax. Most communities offer residential income tax credit, subject to some percentage of the income tax rate in your work community, but also subject to a limit. You may have to file both CCA and RITA tax returns if a different tax agency represents your work and residential community.

E.g., if you work in Cleveland, but live in Cleveland Hts., as I read this table, CH offers a 50 percent credit of your work community's tax rate, but caps the credit at 1 percent. As the CH tax rate is 2.25 percent, you would pay an extra 1.25 percent residential tax in CH.

https://www.ritaohio.com/TaxRatesTable

If you lived in Mentor with a 100 percent credit, and a limit equal to Mentor's tax rate, you would pay no residential municipal income tax.

It's a pain, but it offsets the lower property tax values (reflecting relatively low home prices) in Greater Cleveland, and generally enables higher service levels than in many other states.

Here are CCA community tax rates.

CCA - Division Of Taxation

Unlike in some U.S. cities, Ohio cities tax only earned income, business income, and, sometimes, lottery winnings (check the local city municipal income ordinance if the latter is a concern).

The only way to avoid paying a municipal income tax in Greater Cleveland is to live and work in a township, as townships can't collect municipal income taxes (they likely have higher real estate taxes). Most functioning townships are in counties outside of Cuyahoga County. Check Wikipedia for each county. Chagrin Falls and Olmsted Townships are the only functioning townships in Cuyahoga County (every city in Ohio is in a non-functioning paper township as it relates to that city; incorporating a city or village carves them out from their township).

https://en.wikipedia.org/wiki/Cuyahoga_County,_Ohio

Wow thanks for all the information, very helpful! I noticed Lakewood isn’t a part of RITA and have a lower city tax. So would that mean I’d pay less in city taxes each year living there but working in Cleveland compared to living in let’s say Cleveland heights?

[WRnative]

Originally Posted by Katbat789

Wow thanks for all the information, very helpful! I noticed Lakewood isn’t a part of RITA and have a lower city tax. So would that mean I’d pay less in city taxes each year living there but working in Cleveland compared to living in let’s say Cleveland heights?

Lakewood apparently administers its own municipal income tax system, as a few cities do, as it isn't a member of either RITA or CCA.

Lakewood has a 1.5 percent tax rate, likely among the lowest in Greater Cleveland, but only allows a 1/2 percent credit for taxes paid in another work location. So, if you worked in Cleveland, you apparently would have to pay an additional 1 percent residential income tax if you lived in Lakewood. So apparently you would pay 0.25 percent less residential income tax in Lakewood than in CH.

Municipal Income Tax | The City of Lakewood, Ohio

[Katbat789]

Originally Posted by WRnative

Lakewood apparently administers its own municipal income tax system, as a few cities do, as it isn't a member of either RITA or CCA.

Lakewood has a 1.5 percent tax rate, likely among the lowest in Greater Cleveland, but only allows a 1/2 percent credit for taxes paid in another work location. So, if you worked in Cleveland, you apparently would have to pay an additional 1 percent residential income tax if you lived in Lakewood. So apparently you would pay 0.25 percent less residential income tax in Lakewood than in CH.

Municipal Income Tax | The City of Lakewood, Ohio

Thanks again! Very helpful. Say I made $40,500 what would I pay a year in these taxes to live in Lakewood vs. Cleveland heights?

[WRnative]

Originally Posted by Katbat789

Thanks again! Very helpful. Say I made $40,500 what would I pay a year in these taxes to live in Lakewood vs. Cleveland heights?

Lakewood would tax you 1 percent and CH 1.25 percent, or about $100 more, as explained above.