Does Oregon Tax Social Security and Retirement Income?

Oregon does not tax Social Security

Oregon does not tax any amount of Social Security, Railroad Retirement Board or railroad unemployment benefits. The Oregon return starts from federal adjusted gross income, so whatever part of the benefit was taxed federally (Form 1040, line 6b) is entered as a subtraction on Form OR-40 and removed before Oregon taxable income is figured. Tier 2 and supplemental railroad benefits are subtracted separately on Schedule OR-ASC. (Oregon Department of Revenue, 2025 Form OR-40 Instructions (Publication OR-40-FY))

The subtraction comes after federal AGI, and several Oregon limits are tested on federal AGI itself. The cap on the federal tax subtraction, the exemption credit cut-off and the special medical subtraction all use federal AGI, which still contains the taxable part of Social Security. A larger benefit is never taxed by Oregon, but it can push a household over one of those lines. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Pensions are taxable, except federal service before October 1991

Most retirement income is subject to Oregon tax when an Oregon resident receives it, even if it was earned while living in another state. That covers private-employer pensions, profit-sharing and 401(k) plans, annuities, and state and local government pensions, including Oregon PERS. Oregon has no general pension exclusion. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

Federal pensions are the exception. A retiree can subtract the share of a federal pension that matches service before October 1, 1991: months of service before that date divided by total months of service, rounded to three decimals, times the pension included in federal AGI. Publication OR-17 gives the example of 173 pre-1991 months out of 423, which makes 40.9% of the pension exempt every year. Someone whose federal service all came after that date gets no subtraction. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

Military retired pay is treated as a federal pension under the same formula, using months of service or, for reservists, retirement points earned before October 1, 1991. Oregon has no separate exemption for military retirement income, so a service member who joined after 1991 pays Oregon tax on the whole pension. The subtraction also applies to benefits paid to a beneficiary. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

IRA and 401(k) withdrawals and Roth conversions are fully taxable

Taxable distributions from traditional IRAs, SEP plans, 401(k), 403(b) and 457 plans are in federal AGI and stay in Oregon income; no exclusion applies. Because the 8.75% bracket starts at $11,400 of taxable income for a single filer and $22,800 for a couple, nearly every dollar withdrawn by a retiree with other income is taxed at 8.75%, or 9.9% once taxable income passes $125,000 or $250,000. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

A Roth conversion is taxed in the year of conversion like any other IRA distribution. The one exception is a conversion that another state has also taxed: Oregon allows a subtraction (code 348) when a traditional IRA was converted while the owner lived elsewhere and that state taxed it. A parallel subtraction lets retirees recover contributions to an employer plan that another state taxed when they were made, even though they were deductible federally. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest, dividends and capital gains are taxed as ordinary income

Oregon has one rate chart for all taxable income. Long-term capital gains and qualified dividends get no lower rate; the only reduced capital gain rate in the Form OR-40 instructions is for selling farm assets when leaving farming. A retiree realizing a large gain on appreciated stock pays 8.75% or 9.9% on it, on top of the federal tax. (Oregon Department of Revenue, 2025 Form OR-40 Instructions (Publication OR-40-FY))

Interest and dividends on U.S. Treasury bonds and notes are exempt from Oregon tax and are subtracted on the return. Interest on bonds issued by other states and their local governments, tax-free federally, is added to Oregon income. Any interest paid to carry Treasury securities reduces the subtraction. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

For 2026 a single filer pays 4.75% on the first $4,550 of taxable income, 6.75% up to $11,400, 8.75% up to $125,000 and 9.9% above that. For a joint return the thresholds are $9,100, $22,800 and $250,000. The Department of Revenue’s charts state the tax as a whole-dollar base plus a percentage: $678 plus 8.75% of the amount over $11,400 for a single filer, and $1,357 plus 8.75% of the amount over $22,800 for a couple. Our examples use those charts. (Oregon Department of Revenue, 2026 Publication OR-ESTIMATE (2026 rate charts))

The 2026 withholding formulas, the latest figures the Department of Revenue has published, use a standard deduction of $2,910 for single filers and $5,820 for joint filers, a federal tax subtraction of up to $8,750 and an exemption credit of $263. The 2026 Form OR-40 instructions are not out yet; the estimated-tax booklet issued in October 2025 used rounded estimates of $2,900, $5,800 and $260. For 2025 the figures were $2,835, $5,670, $8,500 and $256. (Oregon Department of Revenue, Oregon Withholding Tax Formulas, effective January 1, 2026)

A person who is 65 or older by January 1 after the tax year adds $1,200 to the standard deduction if single or head of household and $1,000 otherwise, so a couple who are both 65 deduct $7,820 in 2026. Returns with taxable income under $50,000 take the tax from a table rather than the chart, which can move the result by a few dollars. (Oregon Department of Revenue, 2025 Form OR-40 Instructions (Publication OR-40-FY))

Instead of a personal exemption Oregon gives a credit for each person on the return, subtracted from the tax. The credit is lost entirely, not gradually, when federal AGI is more than $100,000 for a single filer or $200,000 for a joint return. That is why the type on this page shows no exemption amount: the credit is applied inside our calculation. (Oregon Department of Revenue, 2025 Form OR-40 Instructions (Publication OR-40-FY))

Oregon is one of the few states that lets residents subtract their federal income tax. The subtraction is the federal liability after credits, limited to a maximum that falls by a fifth at each step of federal AGI: from $125,000 to $145,000 in $5,000 steps for single filers and from $250,000 to $290,000 in $10,000 steps for joint filers. With the 2026 maximum of $8,750, each step removes $1,750. Our single retiree subtracts $5,314 of federal tax, the couple the full $8,750, and the higher-income couple only $3,500. (Oregon Department of Revenue, 2025 Form OR-40 Instructions (Publication OR-40-FY))

The retirement income credit is for residents 62 or older with modest incomes. It equals 9% of taxable retirement income, up to a base of $7,500 ($15,000 on a joint return) that is reduced by Social Security received and by household income over $15,000 ($30,000 joint). It is available only when household income is under $22,500 ($45,000 joint), Social Security is under $7,500 ($15,000 joint), and the two together are under $22,500 ($45,000). None of our three example households qualifies. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

The special Oregon medical subtraction is for taxpayers 66 or older. It covers medical and dental expenses not already deducted, up to a maximum per qualifying person that depends on federal AGI: on a joint return $1,800 below $50,000, $1,400 from $50,000 to $100,000, $1,000 up to $200,000 and nothing above that. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from Oregon's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which does not change with the state. The tax bracket calculator and the guide to taxes in retirement cover that side.

Tax Foundation figures drawn from Census data put Oregon property taxes at 0.81% of owner-occupied home value in 2024, 24th among the states. This is a comparative figure; actual bills depend on the county, the taxing districts and how long the home has been on the roll. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figures from Census ACS data))

Oregon taxes a home on its assessed value, which is the lower of real market value and a maximum assessed value. Under Measure 50, maximum assessed value can rise by no more than 3% a year unless the property is substantially improved or rezoned, so long-held homes are often taxed on far less than they would sell for. Measure 5 separately limits operating taxes to $5 per $1,000 of real market value for schools and $10 per $1,000 for general government. In fiscal year 2025-26 taxes averaged $17.52 per $1,000 of assessed value and $9.40 per $1,000 of real market value statewide. (Oregon Department of Revenue, Oregon Property Tax Statistics, Fiscal Year 2025-26)

For 2026 the senior deferral program is open to households with income under $70,000, counting taxable and non-taxable income for the prior calendar year. The state pays the county and charges 6% simple interest on what it has paid, secured by a lien on the home. Applications go to the county assessor between January 1 and April 15. (Oregon Department of Revenue: Senior and Disabled Property Tax Deferral Program)

The deferral statute sets further conditions that rule out many readers of this page: net worth must be under $500,000, the home must have been the applicant’s homestead for at least five years, it must be insured, and its real market value must fall under a county-based limit. Deferred taxes and interest come due when the owner dies, sells or moves out, unless a surviving spouse continues the deferral. (Oregon Revised Statutes chapter 311 (ORS 311.666 to 311.701, homestead property tax deferral))

Oregon has no general sales or use tax. Groceries, clothing, cars, appliances and restaurant meals are bought at the shelf price. For a retired household spending $60,000 a year on taxable goods, that is several thousand dollars a year not paid compared with a state charging 7% or 8%. (Oregon Department of Revenue: Sales tax in Oregon)

Two limits apply. Sales tax paid in another state cannot be used to reduce Oregon income tax, and Oregon charges a vehicle use tax on new vehicles bought outside the state, payable before the vehicle is titled and registered. (Oregon Department of Revenue: Sales tax in Oregon)

Oregon’s estate tax starts at a level that many retired homeowners reach. A return (Form OR-706) is required when the gross estate is $1 million or more, a figure that is not indexed and that a paid-off house plus retirement accounts will often exceed. The return and payment are due 12 months after death. A non-resident’s estate must file too if it is worth $1 million or more and includes real estate or tangible property located in Oregon. (Oregon Department of Revenue: Estate transfer and fiduciary income taxes)

The tax is 10% of the Oregon taxable estate above $1 million, rising through ten brackets to 16% above $9.5 million. A taxable estate of $1.5 million owes $50,000, one of $2 million owes $101,250, and one of $2.5 million owes $152,500. Oregon has no inheritance tax on heirs. (Oregon Revised Statutes chapter 118, Estate Tax (ORS 118.010 rates, 118.013 and 118.016 special marital property, 118.145 natural resource property))

Transfers to a surviving spouse are deductible, and an executor can elect to treat a trust held solely for the spouse as Oregon special marital property, which postpones the tax until the second death. The statute contains no provision that hands a deceased spouse’s unused $1 million to the survivor. A couple who leave everything outright to each other therefore have one $1 million threshold, not two, at the second death. Qualifying natural resource property, such as a family farm or forest land, can be exempt up to $15 million. (Oregon Revised Statutes chapter 118, Estate Tax (ORS 118.010 rates, 118.013 and 118.016 special marital property, 118.145 natural resource property))

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

Indexed figures rose for 2026: the federal tax subtraction from $8,500 to $8,750, the standard deduction from $2,835 and $5,670 to $2,910 and $5,820, and the exemption credit from $256 to $263. The lower bracket thresholds are indexed as well and stand at $4,550 and $11,400 (single) and $9,100 and $22,800 (joint) for 2026. The 9.9% rate begins at $125,000 and $250,000, as it did in 2025. (Oregon Department of Revenue, Oregon Withholding Tax Formulas, effective January 1, 2026)

Senate Bill 1507 (Oregon Laws 2026, chapter 142) took effect June 5, 2026. It disconnects Oregon from parts of the 2025 federal tax law: the federal deduction for vehicle loan interest and the exclusion for qualified small business stock are not followed, and bonus depreciation is disallowed for 2026 and later. Senate Bill 1511, which would have raised the estate tax filing threshold from $1 million to $2.5 million and indexed it, did not pass. (Oregon Department of Revenue: 2026 Summary of Legislation)

The kicker, Oregon’s refund of surplus revenue, is claimed only on returns for odd-numbered years. The 2025 return carried a credit of 9.863% of 2024 Oregon tax liability. There is no kicker on the 2026 return. (Oregon Department of Revenue: Oregon surplus “kicker” credit)

In the Portland area the Metro Supportive Housing Services tax thresholds are indexed starting with 2026: $128,000 single and $205,000 joint for 2026, and $132,000 and $211,000 for 2027. The Portland Revenue Division, which collects the Multnomah County Preschool for All tax, says that tax’s rate will increase by 0.8% in 2028. (City of Portland Revenue Division: Personal income tax filing and payment information (Metro SHS and Multnomah County PFA))

Oregon taxes residents on income from all sources. A resident is anyone domiciled in Oregon, and also anyone domiciled elsewhere who maintains a residence in Oregon and spends more than 200 days of the year in the state; part of a day counts as a whole day. Domicile is the place a person intends as home, and it is not lost until the person intends to abandon it, intends to acquire a specific new one and is physically present there. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

A person who moves in or out during the year files Form OR-40-P as a part-year resident and is taxed on all income received while a resident plus Oregon-source income for the rest of the year. Someone still domiciled in Oregon is nonetheless taxed as a non-resident if they keep no permanent residence in Oregon, keep one elsewhere all year and spend fewer than 31 days in the state. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)

Federal law (4 U.S.C. 114) bars a state from taxing the retirement income of someone who is neither a resident nor a domiciliary. Oregon follows it: a PERS pension or an IRA built during an Oregon career is not taxed once the retiree has genuinely moved away. (4 U.S.C. 114, Limitation on State income taxation of certain pension income)

Domicile is where departures go wrong. Publication OR-17 describes a retiree who sold his house and spends his time in an Arizona RV park but kept his Oregon driver’s license, vehicle registration and voter registration; Oregon still treats him as domiciled there and taxes his Oregon-source pension. (Oregon Department of Revenue, 2025 Publication OR-17, Oregon Individual Income Tax Guide)