The rule in Ohio
The rule comes from Ohio Rev. Code § 4113.15.
Use-it-or-lose-it. We found no Ohio statute or agency rule on use-it-or-lose-it policies, so the employer’s written policy usually decides.
What to check in your policy
Your handbook or offer letter decides. If it promises payout, that promise can usually be enforced. If it says unused time is forfeited, or says nothing, you may not be owed it. Keep a copy of the policy that was in force when you earned the time.
Tax on a Ohio payout
A payout is taxable wages. Take 80 unused hours at $25.00 an hour, worth $2,000.00. Paid on top of regular wages, it is a supplemental payment, so many employers withhold $440.00 of federal income tax at the flat 22% rate, plus $124.00 of Social Security and $29.00 of Medicare, leaving about $1,407.00.
Ohio income tax is withheld on top of that, under the state’s own rules, so you will receive somewhat less. Withholding is not the final tax; any difference is settled on your return.
Questions people ask
Does Ohio require employers to pay out unused PTO?
Not by law. Ohio has no statute requiring payout of unused vacation. Ohio's wage-payment law lists vacation pay as a fringe benefit, and whether it is paid when you leave depends on your employer's policy or agreement.
Is use-it-or-lose-it vacation legal in Ohio?
Usually, if the written policy says so. We found no Ohio statute or agency rule on use-it-or-lose-it policies, so the employer’s written policy usually decides.
How is a PTO payout taxed in Ohio?
Federally, a payout on top of regular wages is a supplemental payment: many employers withhold 22% for income tax, plus Social Security and Medicare. Ohio income tax is withheld as well, under the state’s own rules.