What Is the Oregon Working Family Credit?
Learn about Oregon's Working Family Credit, a refundable state tax benefit based on your federal EITC, and the process for including it on your state return.
The Oregon Earned Income Credit (EIC) is a state-level tax credit for low-to-moderate-income working individuals and families, designed to reduce their tax burden. It acts as a supplement to the federal Earned Income Tax Credit (EITC), providing additional tax relief based on the federal credit amount. The Oregon EIC is refundable, meaning a taxpayer can receive the full credit amount as a refund even if they owe no state income tax.
Eligibility Requirements
To claim the Oregon EIC, a taxpayer must first qualify for and claim the federal Earned Income Tax Credit for the same tax year. Federal eligibility is based on factors such as adjusted gross income (AGI), earned income, and investment income, with thresholds that vary by filing status and number of children. Once federal eligibility is met, a taxpayer must also satisfy Oregon’s residency requirements. A full-year Oregon resident who qualifies for the federal EITC will also qualify for the Oregon EIC.
A taxpayer using the “Married Filing Separately” status is ineligible for the federal EITC and, therefore, the Oregon EIC. To qualify, individuals must file as Single, Head of Household, Qualifying Surviving Spouse, or Married Filing Jointly. The rules for a qualifying child mirror the federal definitions regarding age, relationship, residency, and joint return status.
Taxpayers without a qualifying child can still be eligible if they meet all other requirements. Part-year residents of Oregon can claim a prorated credit based on the portion of their income earned in the state. Oregon also has an exception allowing individuals who file with an Individual Taxpayer Identification Number (ITIN) to claim the state credit, even if they are ineligible for the federal EITC.
Calculating the Credit Amount
The Oregon Earned Income Credit is calculated as a percentage of the taxpayer’s federal EITC amount. The specific percentage depends on the age of the youngest qualifying child at the end of the tax year.
For taxpayers with a qualifying child younger than three years old, the Oregon EIC is 12 percent of their federal EITC. For all other eligible filers, including those with qualifying children aged three and older and those with no qualifying children, the Oregon EIC is 9 percent of their federal EITC.
To illustrate, consider a taxpayer who qualifies for a federal EITC of $4,000. If their youngest child was two years old on December 31st of the tax year, their Oregon EIC would be $480, which is calculated by multiplying $4,000 by 12 percent. If that same taxpayer’s youngest child was four years old, or if they had no qualifying children, their Oregon credit would be $360, which is the result of multiplying $4,000 by 9 percent.
Information and Forms for Claiming the Credit
To claim the Oregon EIC, a taxpayer must have information from their completed federal tax return. This includes the final calculated amount of the federal EITC. The taxpayer will also need the full names, dates of birth, and Social Security Numbers or ITINs for themselves, their spouse, and any qualifying children.
The credit is claimed directly on the main Oregon personal income tax return, such as Form OR-40 for full-year residents. The calculation is integrated into the tax form, where the taxpayer enters their federal EITC amount and applies the correct Oregon percentage. Taxpayers using an ITIN who qualify for the state credit without the federal one must complete Schedule OR-EIC-ITIN to calculate their credit.
Official forms and instructions can be downloaded from the Oregon Department of Revenue’s website. It is important to use the forms for the correct tax year, as rules and percentages can change. Having the completed federal return on hand is useful to ensure all information is consistent between the federal and state filings.
How to File for the Credit
When a taxpayer uses a program to e-file, the software will use the information from the federal return to determine eligibility and calculate the Oregon credit. The program places the final amount on the correct line of the Oregon tax form. It is then submitted electronically with the rest of the return.
For those who choose to file a paper return, the taxpayer must manually calculate their Oregon EIC based on their federal EITC amount and the age of their youngest child. This calculated amount is then entered on the designated line of their Oregon personal income tax return (Form OR-40, OR-40-N, or OR-40-P). The completed paper return is then mailed to the Oregon Department of Revenue for processing.
After filing, the credit is added to the taxpayer’s total payments. If the credit amount is larger than the income tax owed, the state will refund the difference. The credit will either increase a taxpayer’s overall Oregon tax refund or decrease their total tax liability.