Landlords in North Ohio: federal, state and city income tax on rental income

Checked against the sources linked at the end on 2 October 2026. Written by ProTaxService in Brunswick, OH, for taxpayers across North Ohio. General information, not tax advice for your situation.

TL;DR: Rental income is taxed three times over in North Ohio. The federal return reports it on Schedule E, where depreciation and expenses reduce it. Ohio starts from your federal adjusted gross income, so the same net figure flows through. Your city taxes the net rental profit too, and a rental in a different city can mean a second city return. Rental losses are limited by federal passive loss rules, and a city loss carries forward for five years but does not offset wages.

A rental property is a small business with three tax authorities attached to it. The IRS wants Schedule E. Ohio wants the result in your adjusted gross income. And your city, and sometimes the city where the property sits, wants a share of the net profit. Landlords who only think about the first one tend to find out about the others from a letter.

This guide walks through each layer, with the rules that trip people up: depreciation, losses and the question of which city gets a return.

The federal return: Schedule E

Rental income and expenses go on Schedule E. The IRS’s guide for landlords, Publication 527, says “the basic form for reporting residential rental income and expenses is Schedule E (Form 1040).” Here are the pieces that matter most.

  • Repairs versus improvements. A repair keeps the property in working order and is deducted in the year you pay for it. An improvement that adds value, restores the property or adapts it to a new use is capitalized and recovered through depreciation.
  • Depreciation. Residential rental buildings are depreciated over 27.5 years. Land cannot be depreciated. Depreciation starts when the property is placed in service, meaning ready and available for rent, and the IRS uses a mid-month convention for residential rentals in the first and last year.
  • Security deposits. Do not count a deposit as income when you receive it if you plan to return it. If you keep it, or apply it as the final month’s rent, it becomes income.
  • A house rented fewer than 15 days. If you rent your home for fewer than 15 days in the year, you do not report the rent.
  • Self-employment tax. Rental income generally is not part of net earnings from self-employment, unless you provide substantial services to the tenants, such as regular cleaning or linen changes. In that case the IRS says to report on Schedule C instead.

If you rent short-term, the IRS’s passive-activity rules treat a property with an average customer use of 7 days or less differently, which can change how losses are handled. That is worth a conversation before you file, because the answer depends on the services you provide.

Passive losses: the $25,000 allowance

Rental real estate is generally a passive activity, so losses are limited. If your rental shows a loss on paper, usually because of depreciation, you may not be able to use it all this year. The excess carries forward to later years.

There is one significant allowance. If you “actively participate”, meaning you own at least 10% of the property and make management decisions such as approving tenants and setting rent, you may deduct up to $25,000 of rental loss against other income. It is full at modified adjusted gross income (MAGI) of $100,000 or less. Above that it phases out at 50% of the amount over $100,000, and it is gone at $150,000.

Two extras, briefly. Rentals can qualify as a business for the qualified business income deduction if they meet the IRS’s criteria, including a safe harbor of 250 or more hours of rental services a year (Revenue Procedure 2019-38). And estimated tax rules apply to rents: you may need to pay quarterly if you expect to owe $1,000 or more when you file. Keep receipts and records, because you must keep documentation until the period of limitations for the return runs out.

The state return: your adjusted gross income does the work

Ohio has no special rental rule: its return starts from your federal adjusted gross income. The Ohio statute defines Ohio income as “federal adjusted gross income, as defined and used in the Internal Revenue Code, adjusted as provided in this section.” The net rental income on Schedule E is already in that figure.

Two Ohio points apply to landlords:

  • Rental income is usually nonbusiness income. ODT’s help pages say rents and royalties are “generally” nonbusiness income. A landlord who actively advertises, manages and maintains rentals as a business may be able to treat the income as business income and use the business income deduction on the first $250,000. ODT’s own materials point both ways, so this depends on the facts and is worth reviewing with a preparer.
  • Nonresident owners. If you live elsewhere and own an Ohio rental, the Ohio nonresident credit return lists rents from real property located in Ohio as Ohio income.

For the 2026 state rates, see our guide to Ohio income tax in 2026.

The city return: net profit from rentals

Cities tax the net profit from rentals, and two cities can claim the same rental. Ohio Revised Code 718.01 defines the taxable “net profit” as the amount required to be reported on Schedule C, E or F, reduced by any net operating loss carried forward. For rentals, the sourcing rule in 718.02 says the profit is “subject to tax only by the municipal corporation in which the property generating the net profit is located” and by the municipal corporation where the individual receiving it lives.

How the cities describe it:

  • Brunswick. Its income tax page says every resident 18 or older must file regardless of income, “including any person who owns a business and/or rental property.” Its FAQ lists net rental income as taxable. See Brunswick city income tax for the details.
  • RITA cities, such as Medina. The Regional Income Tax Agency says a rental in a RITA city makes a nonresident owner “engaged in a business activity” and the net income is taxable “whether or not you are a resident.” For residents, it says you are taxed on the net rental income “regardless of the location.” See Medina city income tax.
  • Cleveland-area CCA cities. CCA’s FAQ lists owning a rental in a member city and charging gross rent above $125 a month as a reason to file.
  • Akron. Its resident return has a line for total Schedule E income or loss. Whether Akron treats a nonresident’s rental as doing business is not stated on the pages we found, so ask.

Do not rely on old threshold numbers you may see online. The $250 a month rental figure that appears in older RITA instructions is not in the current ones, and CCA uses $125. Each agency sets its own.

Losses and credits across cities

A net rental loss carries forward, but it cannot offset your wages for city purposes. RITA says a net operating loss may be carried forward for five years and that no portion of it can be used to offset W-2 income. State law says the same: a taxpayer cannot use the loss deduction to offset qualifying wages. CCA adds a limit: a loss in one city may offset a gain from business or rental in the same city, and carry forward for five years.

If a rental sits in a different city than you live in, the credit for tax paid to another city comes into play, and the credit formula differs by city. See our guide to living in one city and working in another, and city income tax for freelancers for the filing mechanics, which are similar for rental profit.

Frequently asked questions

Do I owe city tax on rent if I live in a township?

Townships do not levy a local income tax, but the city where the rental is located can still tax the net profit, and the rental owner may need to file there.

Can I use my rental loss against my paycheck?

Federally, up to $25,000 may be available if you actively participate and your MAGI is within the phase-out range. For city tax, a rental loss does not offset wages.

Is Airbnb income handled the same way?

It can be different. A short average stay and substantial services to guests can move income from Schedule E to Schedule C, with self-employment tax. Review the facts before you file.

Do I need to make estimated payments as a landlord?

If you expect to owe $1,000 or more when you file, the IRS expects estimated payments. Cities set their own estimate rules; our guide to 2026 estimated payments compares all three.

The short version

  • Federal: Schedule E, depreciation over 27.5 years, and passive loss limits with a $25,000 allowance that phases out between $100,000 and $150,000 of MAGI.
  • Ohio: follows your federal AGI. Business income treatment is fact-specific.
  • City: taxes net rental profit where you live and where the property is, with credits and a five-year loss carryforward that does not touch wages.
  • Records: keep receipts, leases and depreciation schedules.

Rules and rates change, and your facts matter. Confirm figures with your city tax office, or bring your records to a preparer.

ProTaxService is a small practice in Brunswick, OH, run by Elena Rusakovich, an IRS-registered tax preparer (PTIN), working with individuals and small businesses across North Ohio. We prepare tax returns for landlords, and we do bookkeeping for small businesses. We prepare city returns for Brunswick and for the cities that use RITA, such as Medina and Strongsville. If you own rentals in more than one city, tell us what you need or call (440) 212-9613.

Sources

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