Oregon Self-Employment Tax: Rates and Requirements
Navigate Oregon's tax landscape as a self-employed individual. Learn how your federal, state, and local tax requirements connect and what you need to pay.
Individuals working for themselves in Oregon face tax obligations at the federal, state, and sometimes local levels. The federal self-employment tax is a contribution to Social Security and Medicare, while Oregon imposes its own state income tax on business profits. Your net earnings from self-employment are subject to these different tax types, each with its own rules and rates. Federal calculations create the foundation for determining your state and local tax liabilities.
Federal Self-Employment Tax Obligations
The federal self-employment (SE) tax is mandated by the Self-Employment Contributions Act (SECA) and is how entrepreneurs contribute to Social Security and Medicare. If your net earnings from self-employment are $400 or more, you are required to pay this tax. The SE tax is composed of two parts: a 12.4% rate for Social Security and a 2.9% rate for Medicare, for a total rate of 15.3%.
The tax calculation begins with your net earnings from self-employment, which is your gross business income less business expenses, an amount determined on IRS Schedule C. The SE tax is not applied to 100% of these net earnings. Instead, you calculate the tax on 92.35% of your net profit.
The Social Security wage base limit is a detail in this calculation. The 12.4% Social Security portion of the SE tax only applies up to an income threshold adjusted annually for inflation. For tax year 2025, this limit is $176,100. Earnings above this cap are not subject to the Social Security component, though the 2.9% Medicare tax applies to all net earnings without an income limit.
The calculation is performed on IRS Form 1040-SE. A feature of the SE tax system is a deduction for one-half of the total SE tax you pay. This deduction is claimed on Schedule 1 of your Form 1040 and reduces your adjusted gross income (AGI), which lowers your income subject to both federal and Oregon state income tax.
Oregon State Income Tax for Self-Employed Individuals
Oregon’s personal income tax system uses your federal Adjusted Gross Income (AGI) as the starting point for state calculations on Form OR-40. The net profit from your federal Schedule C flows through to your Oregon return. Before arriving at your Oregon taxable income, you must account for any differences between federal and Oregon tax law, known as additions and subtractions.
A primary adjustment for self-employed individuals is the deduction for one-half of the federal self-employment tax paid. This amount is subtracted from your income on the Oregon return. This subtraction is a direct line item on the Oregon tax schedule, reducing the income subject to state tax rates.
Once your Oregon taxable income is determined, the state applies a progressive tax rate structure. For the 2025 tax year, Oregon has four tax brackets with rates that increase with income. These rates are applied to different portions of your income, not as a flat rate on the total amount. This marginal rate system means that only the dollars within a specific bracket are taxed at that bracket’s rate.
Statewide and Local Taxes on Self-Employment Income
Self-employed individuals in Oregon may also be subject to local taxes based on their income and location. These taxes are distinct from the state income tax, with their own rules and reporting requirements. They are levied on net earnings from self-employment and must be accounted for separately.
Metro Supportive Housing Services (SHS) Tax
For individuals who live or work within the Metro district, which includes portions of Clackamas, Multnomah, and Washington counties, the Supportive Housing Services (SHS) tax may apply. This is a 1% tax on taxable income over $125,000 for single filers and over $200,000 for joint filers. If your income exceeds these amounts, you are required to file a separate Metro SHS tax return, Form MET-40, and pay the tax on the income above the threshold.
Multnomah County Preschool for All (PFA) Tax
Residents of Multnomah County, or non-residents with income sourced to the county, may be subject to the Preschool for All (PFA) tax. This tax has a tiered structure. A 1.5% tax is applied to taxable income over $125,000 for single filers and over $200,000 for joint filers. An additional 1.5% tax is levied on taxable income exceeding $250,000 for single filers and $400,000 for joint filers, requiring a separate filing on Form MC-40.
Paying Your Oregon Taxes Through Estimated Payments
Self-employed individuals do not have taxes withheld from paychecks and are required to pay their anticipated tax liability through estimated tax payments. In Oregon, you must make these payments if you expect to owe $1,000 or more in tax for the year after withholding and credits. This threshold applies to the total of your expected state income tax and any applicable local taxes.
These payments are due quarterly on April 15, June 15, September 15, and January 15 of the following year. Missing these deadlines or underpaying can result in interest penalties. The state provides Form OR-40-V to accompany mailed payments, but payments can be made electronically through the Oregon Department of Revenue’s online portal.
To avoid underpayment penalties, you can use the “safe harbor” rule, which involves paying 100% of the total tax shown on your prior year’s Oregon tax return. As long as your prior year return covered a full 12-month period, making four equal quarterly payments that total last year’s tax liability will protect you from penalties.
Alternatively, you can calculate your required payments based on 90% of your current year’s expected tax liability. This method requires a careful projection of your annual income and deductions.