Cleveland, OH Local Taxes & Fees: Business Tax Classification (2026)
Key Facts
- Current rate
- 2.5% per annum, effective Jan. 1, 2017
- Governing chapter
- Ch. 192, 2016 Municipal Income Tax
- Pass-through entities
- Taxed under § 192.03(c)-(d)
- Corporations
- Taxed under § 192.03(e)
- Sole proprietors
- Taxed on IRS Schedule C/F net profit
Summary
Cleveland's municipal income tax classifies business taxpayers by entity type under Codified Ordinances § 192.03. Corporations, pass-through entities (partnerships, LLCs, S corps) and sole proprietors are taxed differently on net profits earned in or attributable to the city, currently at 2.5% per annum.
For the purposes specified in Section 192.02, on and after January 1, 1967, an annual tax of one-half of one percent (0.5%) per annum shall be imposed upon the hereinafter specified income; ... and that on and after January 1, 2017, the rate of tax shall be two and one-half percent (2.5%) per annum. ... (c)(1) On the portion attributable to the City of the net profits ... of all resident associations, pass-through entities or other unincorporated business entities treated as a pass-through entity for federal income tax purposes ... (e) On the portion attributable to the City of the net profits ... of all corporations and all other entities and business activities not defined herein as associations, pass-through entity or unincorporated business entity treated as a pass-through entity for federal income tax purposes ...
Official source re-checked September 7, 2026: no newer edition of the code had been published (publisher’s edition: 2026 S-28: Current through legislation passed September 1, 2026).
Full Breakdown
5% effective January 1, 2017: the rate still in force. The section then splits taxable income by who earns it: subsection (a) taxes residents on wages, net profits and rental income from any source; subsection (b) taxes nonresidents only on wages, net profits and other income attributable to work or business conducted within the city. 01(F)(6) and RC Chapter 5745. Subsection (k) limits net profits from a business or profession, for taxable years beginning on or after January 1, 2004, to the taxpayer's adjusted federal taxable income, while sole proprietors (subsection l) and Schedule E rental-activity filers (subsection m) are taxed on the net profit figure reported to the IRS on Schedule C, F or E rather than any city-recalculated base. 0502(b), following Ohio's statewide municipal income tax uniformity changes to RC Chapter 718.
Violations & Fines
The Tax Administrator enforces Chapter 192 and can audit, adjust and reallocate a business's reported net profits to produce a "fair and proper allocation" to the City under § 192.03(k)(1). Misreported classification (e.g., filing as a pass-through entity when the activity is properly a corporation's, or vice versa) exposes a business to back assessment of tax, interest and penalties administered under the chapter's collection and violation provisions, with violations of the chapter separately punishable under § 192.99.
Frequently Asked Questions
What is Cleveland's business income tax rate?
Are pass-through entities taxed the same as corporations in Cleveland?
How are sole proprietors taxed differently under Cleveland's code?
Sources & Official References
Other rules in Cleveland
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