HomeState Guide

Ohio S Corp Election

Ohio automatically recognizes your federal S Corp election. No separate state form is required. However, Ohio has a pass-through entity (PTE) tax regime that requires S Corps to either withhold tax on behalf of nonresident shareholders or make an entity-level tax election. Understanding these requirements prevents surprises at filing time.

The Key Facts

Separate state election required?: No (auto-conforms)
Entity-level tax option: IT-4738 (elective PTE tax)
Withholding requirement: IT-4708 (nonresident shareholders)
Annual filing: IT-1120S or IT-4738
Commercial Activity Tax (CAT): 0.26% above a $6M exclusion. Most small businesses owe nothing

Verified 6 August 2026 against Ohio Revised Code 5733.04(O), ORC 5747.38 and the Ohio Department of Taxation Commercial Activity Tax and PTE rate pages.

Ohio's Pass-Through Entity Tax (IT-4738)

Ohio allows S Corps to elect to pay state income tax at the entity level. This is Ohio's version of the SALT cap workaround. The S Corp pays Ohio income tax on its entire Ohio-source income at the individual rates. Shareholders then receive a credit on their personal Ohio returns.

The federal benefit

The entity level tax is deductible on the S Corp's federal return, outside the individual cap on state and local tax deductions. The One Big Beautiful Bill Act raised that cap to $40,000 for 2025 and $40,400 for 2026, with a phase down that starts above $500,000 of income and a scheduled return to $10,000 in 2030. The election helps most when an owner's state and local taxes exceed the cap. It is made annually on the entity's return.

Commercial Activity Tax (CAT)

The CAT is a gross receipts tax rather than an income tax, and it does not care what you elected federally. What changed is who it reaches. House Bill 33 raised the exclusion from $150,000 to $3 million for 2024 and to $6 million from 2025 onward, and abolished the annual minimum tax entirely. If your Ohio taxable gross receipts are $6 million or less you owe no CAT. The rate above the exclusion is 0.26 percent.

Owing nothing is not the same as filing nothing

This catches people every year. If you have an open CAT account you are still expected to file quarterly returns even when your receipts are zero, and the delinquency notices come regardless. If the $6 million exclusion now puts you out of the tax, the account has to be affirmatively cancelled through the Ohio Business Gateway. Cancel it, do not simply stop filing.

Filing Checklist

File federal Form 2553 with the IRS (Ohio auto-conforms)
Decide whether to elect PTE tax treatment (IT-4738) annually
If PTE elected: file IT-4738 and make quarterly estimated payments
If nonresident shareholders exist: file IT-4708 withholding
File and pay CAT only if Ohio taxable gross receipts exceed $6 million
Issue Ohio Schedule K-1 to each shareholder

Common Mistakes

Skipping the PTE review. Run the numbers each year. The benefit depends on where the owner sits against the federal cap.
Forgetting nonresident withholding. IT-4708 is mandatory if you have out-of-state shareholders.
Confusing the CAT with income tax. It is a gross receipts tax, not reduced by expenses.

Common questions

Does Ohio require a separate S Corp election?

No. Ohio has no state-level S corporation election. Ohio Revised Code 5733.04(O) treats an entity that has made a federal subchapter S election as a pass-through entity directly, and Ohio publishes no S election form.

Do I owe Ohio Commercial Activity Tax?

Only if your Ohio taxable gross receipts exceed 6 million dollars. House Bill 33 raised the exclusion to 3 million for 2024 and 6 million from 2025 onward, and abolished the annual minimum tax. The rate above the exclusion is 0.26 percent.

What is the Ohio pass-through entity elective tax?

Form IT 4738, created by Senate Bill 246 and codified at ORC 5747.38, lets a pass-through entity pay Ohio tax at the entity level as a workaround to the federal state and local tax deduction cap. The election is annual, binding on all owners and irrevocable for the year.

We include guidance on Ohio's PTE election and withholding requirements.