Yes, Oregon has a state income tax
Oregon taxes the income of residents and non-residents who earn money within the state. The tax applies to wages, self-employment income, investment gains, and other earnings. Oregon's state income tax rate ranges from 4.75% to 9.9% depending on your income level — it is a progressive tax system, meaning higher earners pay a higher percentage.
If you live in Oregon or work there, you will owe state income tax on your earnings. Oregon does not have a sales tax, but it makes up for that revenue through income tax. The state also taxes business income, capital gains, and certain types of retirement income.
Key Takeaways
- Oregon's state income tax rates range from 4.75% to 9.9% based on your income bracket, with higher earners paying the higher percentage.
- You owe Oregon income tax if you are a resident or if you earned money within Oregon during the tax year, even if you live elsewhere.
- Oregon has no sales tax, so the state relies on income tax as its primary source of revenue.
- You file Oregon taxes using Form OR-40 (the state income tax return) in addition to your federal return.
- Oregon offers tax credits for dependent children, education expenses, and certain other situations that can reduce what you owe.
Oregon's income tax brackets and rates
Oregon uses tax brackets that change each year based on inflation. For the 2023 tax year, the brackets for single filers started at 4.75% on income up to $3,750, then increased through several brackets, reaching 9.9% on income over $125,000. Married couples filing jointly have higher income thresholds before moving into each bracket.
The state publishes updated brackets every January for the coming tax year. You can find the current year's brackets on the Oregon Department of Revenue website. Because the brackets adjust annually, your tax rate may change from year to year even if your income stays the same.
Oregon also taxes long-term capital gains at a rate of 9.9% on gains above a certain threshold, though there are some exemptions for certain types of assets and situations.
Who has to file an Oregon tax return
You must file an Oregon return if you are a resident with income above the filing threshold, or if you are a non-resident who earned income in Oregon. The filing threshold depends on your age and filing status — generally, you file if your income exceeds the standard deduction for your situation.
Oregon residents include people who lived in the state for more than nine months of the tax year, or who maintained a permanent home there. If you moved to Oregon partway through the year, you may owe tax on income earned after you became a resident. If you moved out of Oregon, you may owe tax on income earned while you were still a resident.
Non-residents who worked in Oregon or had other Oregon-source income must file an Oregon return even if they do not live there. This includes people who worked for an Oregon employer while living in another state, or who had rental income from Oregon property.
Oregon tax forms and filing important date
Oregon uses Form OR-40 as the main state income tax return. You file it along with your federal return by the same important date — April 15 of the following year, or the next business day if April 15 falls on a weekend or holiday. If you file your federal return late, you should also file your Oregon return by the same date to avoid penalties.
Oregon also requires you to file Form OR-40-N (the nonresident return) if you are a non-resident with Oregon-source income. You may also need to file Form OR-40-S if you are married filing separately, or other forms depending on your situation — for example, if you have self-employment income or rental income.
You can file your Oregon return on paper by mail or electronically through the Oregon Department of Revenue website. E-filing is faster and reduces the chance of errors. If you use tax software, it usually handles both your federal and Oregon returns in one process.
Tax credits that reduce what you owe
Oregon offers several tax credits that can lower your state income tax bill. The Oregon Dependent Exemption Credit provides a credit for each dependent child or other may have access to dependent. The Oregon Education Credit covers certain education expenses like tuition and student loan interest.
The state also offers credits for earned income (similar to the federal Earned Income Tax Credit), property taxes paid, and certain energy-efficient home improvements. Some credits are refundable, meaning you can receive money back even if you owe no tax. Others are non-refundable, meaning they can only reduce your tax bill to zero.
To claim a credit, you list it on your Oregon return. The Oregon Department of Revenue website describes each credit and shows which form to use. Many tax software programs will ask you questions about your situation and automatically include credits you may be may have access to to.
What happens if you move out of Oregon
If you move out of Oregon during the tax year, you owe Oregon income tax only on income earned while you were a resident. You file a part-year resident return using Form OR-40 and report only the income from the months you lived in Oregon.
Your new state may also tax you on income earned after you moved there. Some states have reciprocal agreements with Oregon that prevent double taxation, but you should check with your new state's tax authority. If both states tax the same income, you may be able to claim a credit on one return for taxes paid to the other state.
If you moved to Oregon from another state, you file a part-year resident return for the year you moved. You owe Oregon tax only on income earned after you became a resident, and you may owe tax to your former state on income earned before you left.
Self-employment income and Oregon taxes
If you are self-employed or own a business in Oregon, you owe state income tax on your net business income. You report this income on your Oregon return along with your other income. Oregon does not have a separate self-employment tax like the federal government does, but you still owe income tax on what you earn.
You can deduct business expenses from your gross income to arrive at your net income, just as you do on your federal return. Common deductions include supplies, equipment, home office expenses, and vehicle costs. Keep records of all expenses in case the Oregon Department of Revenue asks to see them.
If your business is structured as an S-corporation, partnership, or LLC, Oregon may tax the business entity itself or pass the income through to you as an owner — the rules depend on how you set up your business. A tax professional or accountant can help you understand your obligations.
Frequently Asked Questions
Does Oregon tax retirement income like Social Security or pensions?
Oregon does not tax Social Security benefits. Pensions and retirement account withdrawals are taxed as regular income. If you receive a pension from a government employer, you may may have access to for a pension income exclusion that reduces your taxable income.
What if I work in Washington but live in Oregon?
You owe Oregon income tax on your wages because you are an Oregon resident. Washington has no state income tax, so you will not owe tax there. You file your Oregon return normally and report all your income.
Can I deduct federal income taxes from my Oregon return?
No, Oregon does not allow you to deduct federal income taxes paid. You can deduct state and local property taxes and sales taxes (if you itemize deductions on your federal return), but not federal income tax.
What is Oregon's tax on capital gains?
Oregon taxes long-term capital gains at 9.9% on gains above $250,000 for single filers (adjusted annually for inflation). Gains below that threshold are not subject to the capital gains tax. Short-term gains are taxed as regular income at your ordinary tax rate.
Do I need to pay estimated taxes if I am self-employed?
Yes, if you expect to owe more than a certain amount in Oregon income tax, you should make quarterly estimated tax payments. The Oregon Department of Revenue provides a worksheet to calculate what you owe. Paying estimated taxes throughout the year helps you avoid a large bill at tax time and reduces penalties.