Finance director explains tax credit
To the Editor:
The local income tax is Gahanna's largest source of revenue, making up about two-thirds of the city's general fund. We've received many questions lately about how it works, so I would like to explain the basics.
Local income tax applies only to earned income. It does not apply to retirement income like pensions or Social Security.
In Ohio, local income tax applies first where a person works through employee withholdings. These are the taxes that are taken directly out of employee paychecks and remitted to the city. Employee withholdings make up more than 70 percent of Gahanna's income-tax receipts.
The amount you owe to the city where you live depends on that city's resident credit provision. Gahanna currently provides a partial credit to residents -- 83.3 percent of the first 1.5 percent in taxes paid to their work city.
The math works out so that most working residents receive credit for 1.25 percent in taxes paid to their work city, and they owe Gahanna 0.25 percent. Those Gahanna residents who work in an area with a rate lower than 1.5 percent receive credit for 83.3 percent of what they paid to their work city and owe Gahanna the difference.
The proposed tax-reform would increase the city's tax rate to 2.5 percent and would give residents full credit for what they pay to their work city.
The bulk of the money raised by the proposal would come from employee withholdings from people who work in Gahanna, and if passed, many Gahanna residents actually would pay less in local income taxes because of the change from partial to full credit.
We have provided tools on our website at gahanna.gov to help citizens understand the impact of the tax-reform proposal, and we are always available to answer any questions you may have.
Director of Finance