1031 Exchange in Ohio
Ohio computes its income tax starting from federal adjusted gross income, so a properly structured 1031 exchange that defers gain federally also defers it for Ohio — the state conforms and there is no separate Ohio filing to elect the deferral. Ohio has no 1031 clawback provision comparable to states like Oregon or Massachusetts. Ohio taxes recognized gain (such as boot) as ordinary income at graduated rates that, for the 2026 tax year, top out at a flat 2.75%. Ohio imposes a real property conveyance fee at closing rather than a broad transfer tax.
Fast Facts
- State Income Tax on Capital Gains
- Ohio has no separate capital-gains rate. Gains are included in Ohio taxable income, which begins with federal adjusted gross income, and taxed at the graduated individual rates. For tax year 2026 the top rate is a flat 2.75%.
- Conforms to Federal 1031
- Yes. Because Ohio's tax base starts from federal AGI (ORC 5747.01), gain deferred under IRC Section 1031 is excluded from federal AGI and therefore also deferred for Ohio purposes.
- Clawback Rule
- None. Ohio has no statute that recaptures deferred gain when Ohio property is exchanged into out-of-state replacement property. Gain is taxed when it is later recognized on an Ohio return.
- Non-Resident Withholding
- Ohio does not impose a real-estate-sale withholding on nonresident individual sellers the way some states do. Nonresidents who dispose of Ohio property still file the Ohio IT 1040 to report the transaction; pass-through-entity withholding (IT 1140) can apply when property is held through a PTE.
- Transfer / Conveyance Fee
- Ohio charges a statewide real property conveyance fee of 10 cents per $100 of value (ORC 319.54(G)(3)), plus a permissive county transfer tax of up to 30 cents per $100 (ORC 322.02).
How Ohio Treats a 1031 Exchange
Ohio does not have its own like-kind exchange statute or a special Ohio election form. Instead, the deferral works automatically through conformity. Ohio’s individual income tax is built on top of federal adjusted gross income: the definitions in Ohio Revised Code Chapter 5747 take their meaning from federal income tax law, and Ohio generally taxes an item only if federal law requires it to be included in federal AGI. When you complete a valid federal 1031 exchange, the deferred gain is excluded from your federal AGI for that year — so it never enters the Ohio calculation either. There is no separate Ohio step to claim the deferral.
The practical consequence is that the federal rules do the heavy lifting in Ohio. If your exchange satisfies the federal requirements — using a Qualified Intermediary for a delayed exchange, identifying replacement property within 45 days, closing within 180 days, and exchanging only real property held for investment or business use — the Ohio deferral follows. Conversely, if the exchange partially fails or you receive boot (cash or non-like-kind value), the recognized portion flows into your federal AGI and Ohio taxes it as ordinary income in that year.
Ohio is also notably taxpayer-friendly on the recapture question. Unlike Oregon (ORS 316.738) or Massachusetts, Ohio has no clawback statute that forces deferred Ohio gain back onto the return when you exchange an Ohio property into replacement property located in another state. Ohio simply taxes gain when and if it is recognized on an Ohio return. For an Ohio resident this means worldwide recognized gain is taxed as a resident; for a nonresident, Ohio taxes gain sourced to Ohio real property when recognized. Either way, there is no running Ohio “tab” to track annually after a cross-state exchange.
Legal and Tax Considerations
State Income Tax on Capital Gains
No separate capital-gains rate. Included in Ohio taxable income (starting from federal AGI) and taxed at graduated rates; top rate is a flat 2.75% for tax year 2026.
Conforms to Federal 1031
Yes. Deferral flows through automatically because Ohio's tax base is federal AGI under ORC 5747.01.
Clawback
None. Ohio has no out-of-state recapture statute; recognized gain is taxed on the Ohio return in the year it is recognized.
Non-Resident Withholding
No individual real-estate-sale withholding on nonresident sellers. Nonresidents still file the IT 1040; pass-through withholding (IT 1140) may apply for PTE-held property.
Required Documentation
- Federal Form 8824 (Like-Kind Exchanges) filed with your federal return
- Ohio IT 1040 reporting the transaction — no separate Ohio 1031 election form exists
- Qualified Intermediary exchange agreement and assignment documents
- Complete closing/settlement statements for both the relinquished and replacement properties
Clawback Rule
None
Official References
Ohio Tax Rate and Closing-Cost Context
Ohio does not apply a separate, preferential rate to capital gains. Recognized gain from selling investment real estate — including boot in a partial exchange or the full gain from a failed exchange — is folded into Ohio taxable income and taxed at the state’s graduated individual rates. Ohio has been phasing its individual income tax toward a flat structure: for the 2025 tax year the state used two brackets (2.75% and a top rate of 3.125%), and for the 2026 tax year the top rate drops so that income above the lowest bracket is taxed at a flat 2.75%. Because Ohio’s rates are relatively low compared with high-tax states, the state-level dollar value of deferring an Ohio exchange is smaller than in, say, Oregon or California — but deferral still preserves capital and defers the federal gain, which is where the larger benefit sits. Always confirm the current bracket thresholds on the Ohio Department of Taxation’s rate resources before modeling a specific transaction.
On the transaction side, Ohio does not levy a broad-based deed transfer tax, but it does charge a real property conveyance fee at closing. The mandatory statewide fee is 10 cents per $100 of value (one mill) under ORC 319.54(G)(3). In addition, ORC 322.02 lets each county levy a permissive transfer tax of up to 30 cents per $100 (three mills). Combined, most Ohio conveyances carry a fee in the range of 10 to 40 cents per $100 of value depending on the county, on top of ordinary recording fees. Ohio does have a general sales tax, but it applies to tangible personal property and certain services — not to conveyances of real estate — so it is not a factor in a real-property 1031 exchange.
Step-by-Step Process
- 1
Engage a Qualified Intermediary Before Closing
For a delayed exchange, set up a Qualified Intermediary (QI) before you close on the relinquished Ohio property. You cannot take actual or constructive receipt of the sale proceeds — the QI holds the funds and the exchange documents govern the transaction.
- 2
Sell the Relinquished Property
Close the sale with the QI receiving the proceeds. The deferral is claimed federally on Form 8824; Ohio requires no separate 1031 election form because the deferred gain is already excluded from your federal AGI, which is Ohio's starting point.
- 3
Identify Replacement Property Within 45 Days
You have 45 calendar days from the sale of the relinquished property to identify potential replacement property in writing, following the federal identification rules (such as the three-property rule or the 200% rule).
- 4
Close on Replacement Property Within 180 Days
You must acquire the replacement property within 180 calendar days of the sale (or your tax-return due date including extensions, if earlier). Only real property held for investment or business use qualifies under post-2017 federal law.
- 5
Report Federally and on Your Ohio Return
Report the exchange on federal Form 8824, and carry the resulting federal AGI onto your Ohio IT 1040. If you received boot or the exchange partially failed, the recognized gain is taxed on the Ohio return in that year. Ohio has no annual post-exchange tracking form because it has no clawback.
Timeline Calculator
Enter the closing date of your relinquished property to calculate your 1031 exchange deadlines:
Frequently Asked Questions
Yes. Ohio computes its individual income tax starting from federal adjusted gross income under Ohio Revised Code Chapter 5747. Because gain deferred under IRC Section 1031 is excluded from federal AGI, it is also excluded from Ohio taxable income for that year. There is no separate Ohio election or 1031 form — the federal deferral flows through automatically.
No. Ohio has no statute that recaptures deferred gain when you exchange an Ohio property into replacement property located in another state — unlike Oregon (ORS 316.738) or Massachusetts. Ohio taxes recognized gain in the year it is actually recognized on an Ohio return, and it does not require annual post-exchange tracking of an out-of-state deferral.
Ohio has no separate capital-gains rate. Any gain that is recognized — including boot in a partial exchange or the full gain from a failed exchange — is included in Ohio taxable income and taxed at the state's graduated individual rates. For the 2025 tax year Ohio used a 2.75% bracket and a 3.125% top rate; for the 2026 tax year the top rate drops to a flat 2.75%. Confirm current brackets with the Ohio Department of Taxation.
Ohio does not impose a real-estate-sale withholding on nonresident individual sellers the way some states (such as California) do. A nonresident who disposes of Ohio real property still files the Ohio IT 1040 to report the transaction, and Ohio's pass-through-entity withholding (IT 1140) can apply when the property is held through a pass-through entity. In a fully deferred 1031 exchange, no Ohio tax is due at the time of the exchange.
Ohio charges a real property conveyance fee rather than a broad transfer tax. The mandatory statewide fee is 10 cents per $100 of value (ORC 319.54(G)(3)), and counties may add a permissive transfer tax of up to 30 cents per $100 (ORC 322.02). Ordinary recording fees also apply. Ohio's general sales tax does not apply to conveyances of real property.
Related Guides
- What Is a 1031 Exchange? — the complete federal framework, deadlines, and rules
- 1031 Exchange by State — compare Ohio with other states’ rules and clawback provisions
- Akron, OH
- Canton-Massillon, OH
- Cincinnati, OH
- Cleveland-Elyria, OH
- Columbus, OH
- Dayton, OH
References
Official References
- ORC 5747.01 — Income tax definitions (Ohio conforms to federal AGI / IRC)
- ORC 5747.02 — Ohio individual income tax rates
- Ohio Department of Taxation — Individual Income Tax
- ORC 319.54(G)(3) — Statewide real property conveyance fee
- ORC 322.02 — Permissive county real property transfer tax
- Ohio IT 1140 — Pass-Through Entity and Trust Withholding
- IRS Form 8824 — Like-Kind Exchanges
This information is for educational purposes only and is not legal or tax advice. Consult with qualified professionals regarding your specific situation.