Does Portland MET-40 Apply to You? Tax Filing and Payment Guide

Portland’s MET-40 tax is a local income tax that certain residents and businesses must pay. Since this tax is separate from state and federal obligations, understanding its specific rules is essential to avoid unexpected liabilities or penalties.

This guide clarifies who must pay, how much is owed, available deductions, and the steps for filing and payment.

Who Must Pay

The MET-40 tax applies to individuals and businesses earning income in Portland. Residents with wages, self-employment income, or other taxable earnings within city limits are subject to this tax. Nonresidents working in Portland may also owe taxes, depending on their income and work arrangement.

Businesses, including sole proprietors, partnerships, and corporations, must determine if their revenue meets the filing threshold. Even those based outside the city may owe taxes if they generate income from Portland clients or conduct significant operations within city limits. The tax is based on net earnings, allowing business expenses to reduce the final amount owed.

Certain exemptions exist. Individuals earning below a specified threshold are not required to file. Retirees receiving only Social Security or pension income are generally exempt, but those with rental or investment income tied to Portland may still have a tax obligation. Independent contractors and gig workers must assess their liability, as freelance income earned in the city is taxable.

Tax Rate Considerations

The MET-40 tax has progressive rates, meaning the percentage owed increases with income. For 2024, lower-income individuals and businesses pay a smaller percentage, while higher earners face a greater rate. The city periodically adjusts these rates, so checking the latest figures from Portland’s Revenue Division is necessary.

For individuals, the tax applies to taxable income after adjustments, which may include specific exclusions or modifications. While Portland’s tax structure follows Oregon’s state income tax model, it has distinct differences in exemptions and rates. Freelancers and seasonal workers with fluctuating earnings should estimate their liability carefully to avoid underpayment.

Businesses are taxed on net income, factoring in operating expenses and other deductions before applying the rate. The tax may be tiered, with different percentages for small businesses and larger corporations. If a business operates both inside and outside Portland, apportionment rules determine how much of its income is taxable, typically based on sales, payroll, or property within city limits.

Applicable Deductions

Deductions can reduce taxable income under the MET-40 tax. Self-employed individuals can subtract qualified business expenses, including office supplies, professional memberships, advertising, and home office costs. These expenses must meet the IRS’s “ordinary and necessary” requirement and be well-documented in case of an audit.

Rental property owners can deduct maintenance costs, property management fees, depreciation, and mortgage interest. Portland’s tax code generally aligns with federal rules on rental income deductions, allowing landlords to write off repair expenses. However, major improvements must be capitalized and depreciated over time rather than deducted in full in the year incurred.

Self-employed individuals can also lower taxable income by contributing to retirement accounts such as a SEP IRA or solo 401(k). These contributions reduce MET-40 liability and may provide federal and state tax benefits. Health Savings Account (HSA) contributions made with after-tax dollars can also be deducted.

Filing Steps

To file the MET-40 tax return, taxpayers must gather financial records, including income statements and documentation for deductions. The City of Portland’s Revenue Division updates filing forms periodically, and the most current version is available on the city’s website. Using the correct year’s form is essential to avoid processing delays.

Electronic filing is recommended, as it speeds up processing and provides confirmation. The city’s online tax portal allows taxpayers to input figures, calculate liability, and submit payments. Those filing on paper must mail completed forms to the Revenue Division and meet the deadline to avoid penalties. Portland typically aligns its due dates with Oregon’s state income tax deadlines, meaning returns are generally due on April 15 unless an extension is requested.

Payment Arrangements

Taxpayers must ensure timely payment to avoid penalties and interest. Portland offers multiple payment methods, including electronic payments through the city’s tax portal, direct bank transfers, and mailed checks. Businesses with higher tax liabilities may be required to remit payments electronically.

For those unable to pay in full by the due date, the Revenue Division offers installment plans, allowing payments over several months, though interest accrues on the outstanding balance. To qualify, an application must be submitted detailing financial hardship and proposed payment terms. While approval is not guaranteed, demonstrating a consistent payment history improves the chances of acceptance. Failure to adhere to the agreed schedule can result in further collection actions.

Penalties for Noncompliance

Failing to file or pay the MET-40 tax on time results in financial penalties that increase the longer the tax remains unpaid. A late filing penalty starts at 5% of the unpaid tax and can rise to 25% or more if the delay extends beyond several months.

Interest accrues daily on unpaid balances, compounding the total amount owed. Repeated noncompliance can lead to enforcement actions such as wage garnishments, bank levies, or property liens. Businesses that fail to remit taxes may face license revocation or restrictions on operating in Portland. Taxpayers anticipating difficulties should contact the Revenue Division to explore resolution options before penalties escalate.