OREGON INCOME TAX: All You Should Know

This article contains detailed information about Oregon state income tax brackets vs. California, rates, avoiding Oregon income tax, and sales tax. Oregon’s income tax brackets were last changed for the tax year 2018, two years before 2020, and the tax rates were previously revised in 2010. Oregon’s tax brackets are inflation-indexed and updated annually to reflect changes in the cost of living.

The marginal tax brackets in Oregon range from 5% (the lowest Oregon tax bracket) to 9.9%. (the highest Oregon tax bracket). Each marginal rate applies only to earnings within the applicable marginal tax bracket.

Different tax brackets apply to different filing types in Oregon. Married couples who file their Oregon income tax return jointly usually have lower tax brackets than those who file separately or as individuals.

Oregon Income Tax Rates

The Oregon state income tax rate table for the 2020 – 2021 filing season has four income tax brackets with OR tax rates of 4.75%, 6.75%, 8.75%, and 9.9% for Single, Married Filing Jointly, Married Filing Separately, and Head of Household statuses. The lower three Oregon income tax rates have decreased from the previous year. Because of the annual inflation adjustment, the amounts in the same three lower-income tax brackets have increased.

The Oregon income tax rate and tax brackets are shown below, and they apply to income earned between January 1, 2020, and December 31, 2020. The Oregon income tax rate is expected to remain unchanged in 2021, with the lower three income tax brackets increasing due to the annual inflation adjustment.

Oregon Income Tax Brackets

Looking at the tax rate and tax brackets, we can see that Oregon collects individual income taxes differently depending on whether you are single or married. We can also see the progressive nature of Oregon state income tax rates, which range from the lowest OR tax rate bracket of 4.75% to the highest OR tax rate bracket of 9.9%.

For single Oregon taxpayers who live and work in the state:

The tax rate of the first $3,600 taxable income is 4.75%.
On taxable income between $3,601 and $9,050, the tax rate is 6.75%.
8.75% tax rate on taxable income between $9,051 and $125,000.
On taxable income exceeding $125,000, the tax rate is 9.9%.

For married Oregon taxpayers who live and work in the state:

The tax rate of the first $7,200 taxable income is 4.75%.
On taxable income between $7,201 and $18,100, the tax rate is 6.75%.
8.75% tax rate on taxable income between $18,101 and $250,000.
On taxable income exceeding $250,000, the tax rate is 9.9%.

The OR tax rates and several tax brackets remain unchanged for single, married filing jointly, married filing separately, and head of household filing statuses. However, the Oregon income tax brackets for Married Filing Jointly double from $3,600 to $7,200 at 6.75%, and the highest tax bracket doubles from $125,000 to $250,000 at 9.9%. In Oregon, the Married Filing Separate income tax brackets are half the size of the Married Filing Jointly income tax brackets.

How do Oregon income tax brackets work?

Technically, you don’t have just one “tax bracket”; you pay all of the Oregon marginal tax rates, from the lowest tax bracket to the tax bracket in which you earned your last dollar. However, your Oregon income tax bracket is where your last earned dollar falls for comparison purposes in any given tax period.

Consider the bracketed income tax a flat amount for all earnings up to your highest tax bracket plus a marginal percentage of any profits above that.

Using this model, the chart below breaks down the Oregon tax brackets:

Oregon Income Tax Brackets and Rates for Part-Year and Nonresidents: single or married filers file separately. If you are part-time or nonresident of Oregon, your tax bracket and rate will also be determined by your income:

If your income exceeds $0 but does not exceed $3,650, your tax is 4.75% of your Oregon taxable income.
If your income exceeds $3,650 but does not exceed $9,200, your tax is $173 plus 6.5% of the excess of $3,650.
If your income exceeds $9,200 but does not exceed $125,000, your tax is $548 plus 8.75% of the excess.
If your income exceeds $125,000, your tax is $10,681 plus 9.9% of the excess.

Oregon Income Tax Rates and Brackets for Nonresidents and Part-Year Residents: Head of Household, Married Filing Jointly, or Qualified Widow (er).

If you’re married, the head of a household, or a qualified widow(er) and a part-year or nonresident of Oregon, your tax bracket and rate will also be determined by your income:

If your income exceeds $0 but does not exceed $7,300, your tax is 4.75% of your Oregon taxable income.
If your income exceeds $7,300 but does not exceed $18,400, your tax is $347 plus 6.5% of the excess of $7,300.
If your income exceeds $18,400 but does not exceed $250,000, your tax will be $1,096 plus 8.75% of the excess of $18,400.
If your income exceeds $250,000, your tax is $21,361 plus 9.9% of the excess.

Income Tax Deductions for Oregon

Standard Deduction

Oregon provides a standard deduction to its taxpayers. Oregon’s standard deduction allows taxpayers to reduce their taxable income by $2,350 for single filers, $4,700 for married filing jointly, $3,780 for heads of household, and $4,700 for qualifying widowers for the 2021 tax year.

If their spouse has chosen to itemize their deductions, those married filing separately in Oregon are not permitted to take the standard deduction. Furthermore, if you are 65 or older or blind, you may be eligible for an additional standard deduction:

Single filers and head of household: $1,200
A $1,000 tax credit is available to qualified widowers and married couples filing jointly.

Oregon Income Tax Estimator

You can use the income tax estimator to the left to calculate your estimated Oregon and Federal income tax based on the most recent tax brackets. Remember that this estimator assumes all income is from wages, uses the standard deduction, and ignores tax credits.

Oregon Income Tax vs. California

There are some significant differences between Oregon income tax vs. California taxes, which are detailed below.

#1. State Income Tax

Oregon was one of the first states on the West Coast to implement a state income tax. It has a progressive income tax with four income tax brackets and rates ranging from 4.85% to 9.9%. Oregon’s top marginal rate (9.9%) is one of the highest in the country, but only a tiny percentage of taxpayers pay it. It only applies to single filers who make at least $125,000 per year or joint filers who make at least $250,000 per year.

California, like Oregon, has a progressive income tax. This means that those earning less pay a lower tax rate, while those earning more pay a higher tax rate. California has ten income brackets ranging from 1% to a maximum of 13.3%. The state’s top marginal rate is the highest in the country, but it only applies to taxpayers with taxable income of more than $1 million.

#2. Sales Tax

While most states impose a sales tax on purchasing goods and services, California employs a unique approach. California’s minimum sales tax is one of the highest in the country, at 7.25%. However, some California cities have even higher rates because of the numerous additional city and county sales taxes. Less than half of California’s cities have a 7.25% sales tax. For example, Los Angeles County has a 9.5% sales tax, but neighboring Culver City has a 10.25% sales tax.

On the other hand, neither the state nor the local governments collect any sales tax in Oregon. This is one of the significant financial advantages of living in Oregon.

#3. Property Tax

There are 1,200 local taxing districts in Oregon, with different property tax rates. Tax collections are primarily managed by Oregon’s 36 counties, which evaluate the property and determine taxes owed. Oregon has the 25th highest effective property tax rate, at 0.90%. However, tax rates vary significantly between counties. Josephine County, for example, has the lowest rate of 0.58%, and Morrow County has the highest rate of 1.24%.

Proposition 13, passed in 1978, established California’s maximum allowable property tax rate at 1% of the home’s assessed value. The limited assessed value increases to 2% per year unless the house has undergone construction or ownership change. This law has helped keep California property tax payments below the national average, which is significant in some cases.

Avoiding Oregon Income Tax

Now that you know Oregon has high-income tax rates, you may wonder how to avoid them—or leave if you already do. Unlike federal taxes, you cannot claim exemptions if you earn income outside of the state, so you will have to relocate eventually.

However, I do not recommend simply moving to a neighboring state and calling it quits. Moving from California to Nevada may help you save a few dollars, but you’re still paying Uncle Sam your hard-earned income annually.

To get significant tax breaks, consider strategies such as moving to another country to claim the Foreign Earned Income Exemption and legally using offshore companies to reduce your US tax bill.

Moving to Puerto Rico may also be an option for some entrepreneurs… However, be wary of promoters who tout it as a panacea for US taxes. If you live in a high-tax state such as California or Oregon, you should begin planning your move as soon as possible.

However, it’s natural to be hesitant about moving somewhere completely new. You might miss the California beaches or the energy of New York City. The answer to this hesitancy is simple: travel.

Travel to Thailand or the Caribbean. You’ll quickly discover that California’s beaches aren’t all that great, and you can live just as close to those better beaches while paying a fraction of California’s cost of living.

Is Oregon income tax high?

Oregon’s individual effective income tax rate of 23.37% – just ahead of Massachusetts and Connecticut – was bolstered by its state effective tax rate of 7%, which was by far the highest among states.

Is Oregon or California income tax higher?

California has the highest income tax bracket, with a maximum tax rate of 13.3%. California’s lowest tax bracket is 1%, one of the weakest in the country. Oregon has the highest income tax rate, with 9.9% in the highest bracket.

What is the Oregon income tax rate for 2023?

Over $0 but not more than $7,500: $219.00 plus 4.75%
More than $7,500 but less than $18,900: $575.00 plus 6.75% of any amount over $7,500
Over $18,900: $1,345.00 plus 8.75% of the excess.

Is Oregon a tax-friendly state?

Oregon has a moderately low tax rate. While the state does not tax Social Security benefits, it does tax other forms of retirement income, such as withdrawals from retirement accounts. Furthermore, both public and private pension income is taxed in part. Wages are taxed flatly, with the marginal state tax rate set at 9%.

Is it cheaper to live in Oregon or California?

Living expenses

California costs 19.3% more than Oregon. Everything in California will be more expensive, including housing, rent, groceries, and monthly expenses. In California, housing costs 39.5% more, transportation costs 11.5% more, and monthly grocery expenses are likely 11.8% higher.

What is the most tax-friendly state?

Wyoming. Wyoming is the most tax-friendly state for middle-class families! For starters, Wyoming has no income tax.

Oregon Income Tax FAQs

What is the most tax-friendly state to retire in?

Alaska, Florida, Georgia, Kentucky, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, and Wyoming are the ten most tax-friendly states for retirement (in no particular order).

What are the three least taxed states in the US?

Everyone wants their tax bill to be reduced. One option is to live in a state with no income tax. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming currently have no state income tax.

Is Oregon a Tax-friendly state for retirees?

For retirees, Oregon is moderately tax-friendly. As previously stated, it exempts Social Security retirement benefits from state income taxation. It also has no sales tax and slightly lower property taxes than the national average.