What Percentage Does Oregon Take Out for Taxes?

Oregon’s tax system presents a distinct approach to revenue generation compared to many other states. Understanding how the state collects its funds requires looking beyond a single percentage, as various taxes contribute to the overall financial landscape. This system supports public services and infrastructure without relying on a broad-based sales tax, a common feature in most other jurisdictions.

Oregon Individual Income Tax

Oregon operates a progressive individual income tax system, meaning higher earners generally pay a larger percentage of their income in state taxes. For the 2024 tax year, income tax rates range from 4.75% to 9.9%. The 4.75% rate applies to the initial portion of taxable income, increasing through intermediate brackets to the top rate of 9.9% for income exceeding specific thresholds. For single filers, the 9.9% rate applies to taxable income over $125,000, while for those married filing jointly or head of household, this top rate begins on income over $250,000.

The application of these rates is marginal, meaning only the portion of income falling within a particular bracket is taxed at that specific rate, not the entire income. For instance, a single filer with $50,000 in taxable income would pay 4.75% on the first $4,300, 6.75% on the next $6,450, and 8.75% on the remaining income. This graduated structure distributes the tax burden based on an individual’s ability to pay.

Several factors influence an individual’s final income tax liability, including filing status. Income thresholds for each tax bracket differ significantly between single filers and those married filing jointly or head of household. Standard deductions also reduce the amount of income subject to taxation. For 2024, the standard deduction is $2,745 for single filers and married filing separately, $5,495 for married filing jointly or qualifying surviving spouse, and $4,420 for head of household. Individuals who are blind or over 65 may receive an additional standard deduction.

Oregon also provides various state-level tax credits that can directly reduce the amount of tax owed. For example, the Oregon Earned Income Credit (EIC) is available to those who qualify for the federal EITC, with the state credit amounting to 9% of the federal EITC, or 12% if there’s a qualifying dependent under age three. A refundable credit, known as the Oregon Kids’ Credit, offers $1,000 per qualifying child aged five or younger for eligible taxpayers, with income limits applying. Additionally, credits exist for contributions to Oregon ABLE accounts and higher education savings plans, potentially offering a refundable tax credit up to $180 for single filers or $360 for joint filers.

Other Common Oregon State Taxes

A notable characteristic of Oregon’s tax structure is the absence of a statewide sales tax, setting it apart from most other states. However, this distinction necessitates other revenue streams for state and local governments.

Property taxes constitute a significant portion of local government funding in Oregon. While assessed and collected at the local level, state laws and constitutional measures influence their calculation. Property taxes are based on a property’s assessed value, which cannot increase by more than 3% annually, regardless of market value fluctuations, unless significant improvements are made. The state also imposes limits on the tax rates that can be applied, with educational taxes capped at $5 per $1,000 of real market value and general government taxes at $10 per $1,000. The effective property tax rate in Oregon is around 0.86% of a home’s value, which is slightly below the national average.

Beyond income and property taxes, Oregon levies various excise taxes and fees. The state’s gasoline tax is $0.40 per gallon, contributing to transportation infrastructure funding. Vehicle registration fees also vary based on factors like vehicle type and fuel efficiency. There is also a privilege tax of 0.5% on new vehicle purchases, which may increase to 1%.

Excise taxes are also applied to certain goods. For instance, the cigarette tax is $1.31 per 20-cigarette pack. Alcoholic beverages are subject to various excise taxes, with a notably high tax on spirits at $22.72 per gallon, while beer is taxed at $0.08 per gallon and wine at $0.67 per gallon. These specific taxes contribute to the state’s overall revenue.

Local and Specific Oregon Taxes

While individual income tax and property taxes are the most prominent, local jurisdictions in Oregon may impose additional, more specific taxes. Local income taxes are rare, meaning residents generally only pay state income tax.

Local option levies are a mechanism through which communities can approve temporary property tax increases to fund specific services or projects. These levies require voter approval and are typically used for schools, public safety, or other local government functions, supplementing the permanent tax rates. These levies are time-limited, often for five years for operating costs or up to ten years for capital projects, and are subject to the state’s property tax limits.

Another type of localized tax includes lodging taxes, which are typically levied on temporary lodging such as hotel stays. These taxes are set by individual cities or counties and contribute to local tourism promotion or general funds.

Oregon also has a Corporate Activity Tax (CAT), which is a 0.57% tax on commercial activity over $1 million. While it is a business tax, its cost can indirectly influence consumer prices. This tax, implemented in 2020, was designed to provide dedicated funding for K-12 education.