Explaining Oregon’s Primary State Taxes

Oregon is one of the few states without a statewide sales tax, which places a greater emphasis on other revenue sources like the personal income tax. Residents and those earning income in the state will find their tax obligations are weighted toward income-based assessments. This overview covers the primary taxes that form the state’s financial backbone, explaining how revenue is generated and what taxpayers can expect.

Oregon Personal Income Tax

Filing requirements for Oregon’s personal income tax depend on residency status. An individual is an Oregon resident if they are domiciled in the state, which is the place they consider their permanent home and intend to return to after an absence. Residency can also be established by maintaining a permanent home in Oregon and spending more than 200 days there. Full-year residents are taxed on all income, while part-year residents and nonresidents are taxed only on income from Oregon sources. Part-year residents are also taxed on all income earned while they were a resident.

Oregon uses a progressive tax system with four brackets. For the 2024 tax year, the rates are 4.75%, 6.75%, 8.75%, and 9.9%. The top rate of 9.9% begins at taxable income over $125,000 for single filers and over $250,000 for those married filing jointly. These brackets are indexed to inflation and can adjust over time.

Taxpayers can reduce taxable income with either the standard deduction or itemized deductions. For 2024, the standard deduction is $2,745 for single filers and $5,495 for joint filers. Since Oregon’s standard deduction is lower than the federal amount, some may find it beneficial to itemize on their state return. Oregon’s itemized deductions are similar to federal deductions, but state and local income taxes cannot be deducted.

Oregon offers several tax credits to reduce tax liability. The Oregon Earned Income Credit (EIC) is for those who qualify for the federal EIC and is calculated as a percentage of the federal credit. The state credit is 9% for most filers and 12% for those with a dependent under age three. The Oregon Kids Credit provides up to $1,000 per child for dependents aged five and under for low-income families. The Political Contribution Credit allows up to $50 for single filers and $100 for joint filers with an adjusted gross income below certain limits.

Business and Corporate Taxes

The tax structure for businesses in Oregon depends on the entity type. C-corporations are subject to either the corporate excise tax or the corporate income tax. The excise tax applies to corporations doing business in Oregon, while the income tax applies to those not doing business in the state but having income from an Oregon source. Both taxes use a two-tier rate: 6.6% on taxable income up to $1 million and 7.6% on income over $1 million.

Oregon’s Corporate Activity Tax (CAT) is a tax on a business’s taxable commercial activity, not its income. It applies to most business entities with taxable commercial activity over $1 million. The tax is $250 plus 0.57% of the activity over the $1 million threshold. The CAT is levied in addition to any corporate income or excise taxes. To reduce the tax base, businesses can subtract 35% of their apportioned cost inputs or 35% of their labor costs, whichever is greater, from their gross receipts.

Income from pass-through entities like S-corporations, partnerships, and LLCs is not taxed at the entity level. Instead, profits or losses are passed through to the owners, who report the income on their personal tax returns. This income is then taxed at their individual rates, which prevents double taxation.

Property Taxes in Oregon

Property taxes in Oregon are local taxes that fund governments, schools, cities, and counties. The system uses two measures of a property’s value: Real Market Value (RMV) and Assessed Value (AV). RMV is the property’s likely sale price, while AV is the value used for tax calculations and is limited by Measure 50.

Under Measure 50, a property’s maximum assessed value (MAV) cannot increase by more than 3% annually, unless modifications are made to the property. A property’s Assessed Value (AV), which is the value used for tax calculation, is the lower of its RMV or its MAV. This structure ensures that even if a property’s market value increases rapidly, the growth in its taxable value is capped, providing predictability for property owners.

Property tax is calculated by multiplying the property’s AV by the combined tax rate of all local taxing districts. These rates are expressed per $1,000 of assessed value. Each year, local districts set their budgets and calculate the tax rate needed to fund their services. The total rate is the sum of rates for the county, city, school district, and any special districts.

Property tax statements are mailed by October 25th for the tax year running from July 1 to June 30. The standard due date is November 15. Payments can be made in a single lump sum or in three installments due November 15, February 15, and May 15. Discounts are available for early payments made by the November due date.

Other Notable Oregon Taxes

Oregon imposes an estate tax on the transfer of a decedent’s estate valued over $1 million. The tax rates are progressive, increasing with the value of the estate above the $1 million exemption.

Some local jurisdictions in Oregon have their own income taxes to fund specific programs. For example, the Portland metropolitan area has a Supportive Housing Services tax to fund services for people experiencing homelessness. These local taxes are in addition to the state income tax.

Multnomah County’s Preschool for All tax funds universal preschool through a personal income tax. It imposes a 1.5% tax on taxable income over $125,000 for single filers ($200,000 for joint filers), with an additional 1.5% tax on income over $250,000 for single filers ($400,000 for joint filers).

Filing and Paying State Taxes

Taxpayers can file their Oregon state tax returns electronically or by mail. E-filing through approved tax software is the fastest method and often leads to quicker refunds. The Department of Revenue also offers a free portal, Revenue Online, to file returns, make payments, and check refund status. Paper filing by mail is also available.

The specific form a taxpayer needs depends on their residency status, as the forms are designed to accommodate different income reporting rules. Full-year residents use Form OR-40. Part-year residents file Form OR-40-P, and nonresidents use Form OR-40-N. Selecting the correct form is necessary for an accurate tax calculation.

Tax payments can be made in several ways. Taxpayers can authorize a direct debit from a bank account through Revenue Online or tax software. Payments by credit or debit card are also accepted, though a processing fee may apply. A check or money order can also be mailed to the Department of Revenue.

The deadline for filing personal income tax returns in Oregon is April 15. An automatic six-month filing extension is available if needed. However, an extension to file is not an extension to pay. To avoid penalties, taxpayers must pay at least 90% of their estimated tax liability by the original April deadline.