1031 exchange in
Ohio.

Does Ohio follow federal 1031 rules?

Ohio conforms to federal Section 1031 for real property. The state-specific complication is municipal income tax — Ohio is unusual in that most major cities (Columbus, Cleveland, Cincinnati, Toledo) impose 2-3% municipal income taxes on residents and on workers earning income within city limits. For most non-resident 1031 sellers, the municipal tax does not reach capital gains; for residents, it usually does.

Ohio capital gains tax structure

Ohio moves to a flat 2.75% income tax rate for tax year 2026 on income above approximately $26,050. Capital gains are taxed as ordinary income with no preferential long-term rate. Most Ohio cities do NOT tax capital gains for non-residents, but residents may owe municipal income tax on capital gains depending on the city.

Ohio is moving to a flat 2.75% income tax rate effective tax year 2026, on income above approximately $26,050. Capital gains are taxed as ordinary income with no preferential long-term rate. Ohio's distinctive feature is the municipal income tax overlay — most major cities impose 2-3% income taxes (Columbus 2.5%, Cleveland 2.5%, Cincinnati 1.8%, Toledo 2.5%, Akron 2.5%). Residents of these cities generally owe municipal tax on capital gains; non-residents typically do not, because most Ohio cities exempt capital gains from municipal income tax for non-residents under Ohio Revised Code Chapter 718. specific city ordinances for any large gain. New 2026 capital gains deductions for qualifying business owners and investors took effect for tax years beginning on or after January 1, 2026 — narrowly applicable but worth checking with your CPA. Estimated payments are due quarterly when liability exceeds $500.

Federal tax treatment of a successful 1031 is deferral of capital gain and unrecaptured Section 1250 depreciation recapture (federally taxed at a maximum 25% when eventually recognized). Ohio's state treatment sits on top of those federal rates.

Common 1031 replacement strategies in Ohio

Columbus is the fastest-growing OH metro and the institutional 1031 magnet. The Intel Licking County fab (now $28B, 1,000-acre site, expected operations 2030-2031) is the biggest single CRE event in OH history — and the 2024 timeline pushback materially changed the near-term underwriting for nearby industrial and multifamily. Cleveland is the medical-anchor story — Cleveland Clinic, University Hospitals, MetroHealth — but suburban Class B office is genuinely distressed. Cincinnati is P&G, Kroger, and a healthcare/insurance tenant base; Class B multifamily 6.0-7.0% with a recently-cooled rent-growth story. Toledo is glass-and-auto industrial along I-75 and the Maumee River. OH industrial generally trades 5.75-6.75% on credit-tenant — institutional buyers favor OH for its yield-relative-to-risk profile in the Midwest.

Top Ohio CRE markets for 1031 buyers

Columbus

Fastest-growing OH metro, anchored by state government, OSU, JPMorgan Chase's largest non-NYC employee base, and the Intel Licking County fab story. Class B multifamily 5.75-6.75% in inner submarkets, with rent growth that has held up better than Cleveland or Cincinnati. Industrial along I-70 and I-71 5.75-6.75% on credit-tenant. The Intel timeline pushback (operations now 2030-2031) repriced near-term Licking County industrial and multifamily — opportunity for patient capital, headache for buyers underwriting off 2022 timing.

Cleveland

Medical anchors (Cleveland Clinic, University Hospitals, MetroHealth) drive credit-tenant medical office at 5.75-6.75%. Suburban Class B office is genuinely distressed with sub-6% pre-pandemic cap rates that have widened to 8.5%+ on troubled product. Class B multifamily 6.5-7.5%; industrial along I-71 and the lakefront 6.0-7.0%. The Cleveland CBD office market is the worst-performing segment statewide — avoid as 1031 replacement unless you're buying at distressed pricing with a real adaptive-reuse thesis.

Cincinnati

P&G, Kroger HQ, and a deep healthcare/insurance tenant base (TriHealth, Mercy, Western & Southern). Class B multifamily 6.0-7.0%; industrial along I-75 5.75-6.75%. Cincinnati's mid-tier multifamily has been a steady institutional 1031 destination — yields wider than Columbus but with credit-tenant employment depth that's better than the rest of OH outside Columbus. Watch the Cincinnati municipal income tax (1.8%) for residents — non-residents generally aren't reached on capital gains.

Toledo

Glass and automotive industrial along I-75 and the Maumee River. Cap rates 6.5-7.5% on stabilized industrial; multifamily Class B 7.0-8.0%. The Stellantis (former Chrysler) and Toledo Refining anchor the auto-supply-chain demand; glass (Owens-Illinois HQ) is a smaller but real anchor. This is a yield market — wider caps than the rest of OH, with thinner broker depth and slower exit timelines.

Local counsel, recording, and filing in Ohio

OH is not an attorney-state for real estate — title companies handle most closings — but commercial deals routinely involve OH counsel given the municipal income tax overlay, the prevailing-wage and tax-incentive structures (especially around Intel and other megaprojects), and the 88-county recording quirks. Recording is by county; Franklin (Columbus), Cuyahoga (Cleveland), Hamilton (Cincinnati), and Lucas (Toledo) handle the bulk of commercial volume. Title insurance rates are not state-regulated.

Recent developments in Ohio

Two big themes in 2024-2026. First, Ohio's flat-tax transition — the 2.75% rate is effective for tax year 2026, and new capital gains deductions for qualifying business owners and investors took effect January 1, 2026 (narrowly applicable but worth checking). Second, the Intel Licking County fab construction timeline pushed back: original 2025 production targets moved to 2030-2031 for Mod 1 / 2031-2032 for Mod 2. The pushback affected near-term rent growth assumptions for Licking County / New Albany industrial and multifamily — buyers who underwrote off 2022-era timing have repriced or backed out.

Common mistakes in Ohio 1031 exchanges

• Misapplying Ohio municipal income tax on capital gains. Most Ohio cities (Columbus, Cleveland, Cincinnati, Toledo, Akron) impose 2-3% municipal income tax. Residents generally owe municipal tax on capital gains from real estate sales, even when the property sits outside the city. Non-residents generally do not — most Ohio municipal codes exempt capital gains from non-resident municipal taxation under ORC Chapter 718. CPAs from outside OH sometimes get this backwards and over-withhold or under-pay. Confirm the specific city ordinance for any large gain.
• Underwriting Licking County off pre-pushback Intel timing. Intel's Ohio One fab was originally targeted for 2025 production. The 2024 timeline pushback moved Mod 1 operations to 2030-2031 and Mod 2 to 2031-2032. Investors who underwrote 2022-era industrial and multifamily comps near New Albany on the assumption of 2025 ramp are now five-plus years long on lease-up. Reprice or wait — don't pretend the timeline didn't change.
• Skipping the post-2025 OH flat-tax planning window. OH moved to a flat 2.75% rate effective tax year 2026 (down from a graduated structure topping at 3.5%). For a 1031 exchanger recognizing a large boot or planning final gain recognition, the year of recognition matters — gain recognized in 2025 paid the older graduated top rate; gain recognized in 2026 forward pays 2.75% flat. CPAs who didn't model the rate transition for clients with multi-year deferral plans likely under-optimized the timing.

What to do if you're starting a Ohio-source 1031

1. Engage a Qualified Intermediary before the downleg closes. Your QI cannot be a disqualified person (attorney, CPA, or real estate agent who has represented you in the last two years).
2. Confirm state conformance and any clawback or withholding filings with a Ohio-licensed CPA.
3. Identify replacement property within 45 days in writing, delivered to your QI, under the Three-Property Rule or one of the alternative identification rules.
4. Close on replacement within 180 days of the downleg closing or by your federal tax-return due date (with extensions), whichever is earlier.
5. File Form 8824 with your federal return reporting the exchange. File any required Ohio state forms for the year, including any clawback or withholding-exemption filings.

FAQ: 1031 exchanges in Ohio

Does Ohio's flat 2.75% tax rate apply to capital gains?

Yes. Effective tax year 2026, OH applies a flat 2.75% rate to most income (above approximately $26,050), including capital gains. There is no preferential long-term rate. Gain recognized in 2025 paid the older graduated rate (top 3.5%), so for clients with multi-year deferral plans the year-of-recognition timing matters.

Do Ohio cities tax capital gains from real estate sales?

It depends on residency. Most Ohio cities (Columbus 2.5%, Cleveland 2.5%, Cincinnati 1.8%, Toledo 2.5%) tax residents on capital gains as part of municipal income tax. Most cities do NOT tax non-residents on capital gains — Ohio Revised Code Chapter 718 generally exempts non-residents from municipal taxation on passive investment income. Confirm the specific city ordinance for any large gain, because municipalities have some latitude.

How did the Intel Licking County timeline pushback affect Ohio 1031 underwriting?

Materially. The original 2025 production target for Intel's Ohio One fab in Licking County moved to 2030-2031 (Mod 1) and 2031-2032 (Mod 2). Investors who underwrote 2022-era industrial and multifamily comps near New Albany and Pataskala on a 2025 ramp assumption are now five-plus years long on lease-up. Cap rates near the site repriced wider through 2024-2025 as the timing reset. For patient capital, this is opportunity — for shorter-hold investors, it's a real underwriting issue.

Is there non-resident real estate withholding in Ohio?

No. OH does not require buyer-side withholding on real estate sales by non-residents at the state level. Non-resident sellers file Form IT-1040 (with the appropriate non-resident schedule) and pay any liability with the return. Cleaner than NJ, NY, or MD next door. Note that municipal taxation is a separate question — most Ohio cities don't reach non-residents on capital gains, but confirm the specific ordinance.

Can I 1031 into Cleveland medical office and what's the cap rate?

Yes, and the Cleveland medical office market is one of the deeper credit-tenant institutional asset classes in OH. Cleveland Clinic, University Hospitals, and MetroHealth anchor most stabilized medical office product, which trades 5.75-6.75% on credit-tenant deals. The off-campus Class B medical product widens to 7-8% but has more leasing risk. Avoid Cleveland CBD office unless you're buying at deep distressed pricing with an adaptive-reuse thesis.

Do Ohio's 2026 capital gains deductions for business owners apply to my real estate 1031?

Probably not. Ohio's new capital gains deductions effective January 1, 2026 are narrowly targeted at qualifying business owners and investors — typically tied to ownership stakes in Ohio-based operating businesses meeting holding-period and other requirements. Passive real estate investment generally does not appear to qualify, but the rules are new and guidance is still developing. Run any large 1031 boot recognition through OH-specific CPA review before relying on the deduction.