If you live in Oregon, you are subject to Oregon state income tax on all your income, including from outside the state. Nonresidents are subject to state income tax on income from sources in Oregon. You have to file an Oregon state income tax return if your gross income is over a certain amount based on your filing status and age. You can find these limits under filing requirements on the Oregon Department of Revenue website. You should file an Oregon return if Oregon state income tax was withheld from your pay and you are due a refund.
Your Oregon state income tax is based on your federal adjusted gross income. But there are certain adjustments you must make, and there are deductions and credits you can take on your Oregon return that are different than those on your federal return.
Oregon deductions
The following are some of the deductions you can claim on your Oregon state tax return.
Age 65 or older or blind
If you are age 65 or older or blind, you can claim a larger standard deduction on your Oregon state income tax return.
Federal pension income
If you receive a pension from the federal government, you may be able to deduct a portion of that pension income on your Oregon return. You can deduct the portion of the pension that corresponds to your months of service before October 1, 1991.
Social security and railroad retirement benefits are not subject to Oregon state income tax. If you had to include any of these benefits as income on your federal tax return, you can subtract that amount on your Oregon return.
If you are an enrolled member of a federally-recognized Native American tribe, you can deduct the income you earn from sources within Native American country in Oregon while you live on that land. To claim this deduction you need to file the Exempt Income Schedule for Enrolled Members of a Federally Recognized American Indian Tribe.
Active military duty
If you had to include any active military duty pay on your federal tax return, you can deduct all the active military duty pay you received outside Oregon and up to $6,000 of active military duty pay earned in Oregon. This deduction includes pay for guard and reserve annual training, weekend drills and inactive duty training.
Spouses of military service members
If you are the spouse of a military service member who is stationed in Oregon and you are in Oregon only to be with your service member spouse, you may be able to exclude the income you earn in Oregon from Oregon state income tax.
If you were a member of the Oregon National Guard or Reserve and you were required to be away from home overnight for at least three weeks, you can deduct all your Oregon National Guard or Reserve pay.
Interest on federal obligations
On your Oregon tax return you can deduct any interest on U.S. Government obligations such as U.S. series EE, I or HH bonds, Treasury bills or notes that you included as income on your federal tax return. This includes interest income from mutual funds that invest in U.S. Government obligations.
You can claim a deduction for your contributions to an Oregon 529 college savings plan. You can deduct up to $4,180 if you file a joint return and up to $2,090 if you file under another status. If you cannot claim a deduction for all your contributions in one year, you can carry forward the balance for four years.
Oregon lottery
Your winnings from the Oregon lottery have to be reported as income on your federal tax return. But if you won $600 or less from a single ticket or play, you can deduct those winnings on your Oregon return.
Severance pay
If you receive severance pay and invest it in a small business you may be able to claim a deduction on your Oregon tax return. To qualify for this deduction your investment cannot be a loan. You must have an ownership interest. And your investment must stay in the business for at least 24 consecutive months.
The business must not have more than 50 employees and must be for profit. And you must materially participate in the business, which means you must work more than 500 hours per year in the business, work more than 100 hours per year and at least as much as any other employee or owner in the business, or you must have performed substantially all the work in the business.
You can deduct your actual investment in the business, up to a maximum of $500,000. If the business has operations outside Oregon, you must prorate your investment based on sales in Oregon. To claim this deduction you need to file Form SPS – Severance Pay Subtraction.
If you can claim the credit for child and dependent care expenses on your federal tax return you can claim a percentage of that credit on your Oregon return. The percentage depends on your federal adjusted gross income and ranges from 4% up to 30%.
Retirement income credit
If you are 62 or older you may qualify for the retirement income credit. To qualify, your household income must be less than $22,500 ($45,000 if filing jointly) and your Social Security or tier 1 railroad retirement benefits must be less than $7,500 ($15,000 if filing jointly). The credit is up to 9 percent of your retirement income, which includes U.S. government and military pensions, state or local government pensions, employee pensions, IRAs, 401(k) plans, deferred compensation plans, and employee annuity plans.
Credit for the elderly or disabled
If you can claim the credit for the elderly or disabled on your federal return, you can claim 40% of that amount as a credit on your Oregon return. If you claim the retirement income credit you cannot also claim the credit for the elderly or disabled.
Political contributions
You can claim a credit for your contributions to a political party, a candidate for federal, state or local public office, or to a political action committee in Oregon. The maximum credit is $100 on a joint return and $50 if you file under another status.
Long term care insurance
If you pay long term care insurance premiums for you, your parents or dependents, you can claim a credit for 15% of the premiums up to a maximum credit of $500. If you claim a deduction for this insurance on your federal tax return, you would have to add back that deduction on your Oregon return in order to claim this credit.
Energy efficiency and renewable energy
If you install an energy efficient appliance, heating and air conditioning system, or a renewable energy system in your home, you can qualify for a tax credit on your Oregon tax return. Both homeowners and renters can qualify. The Oregon Department of Energy provides information on the amount of the credit.
If you have a certain minimum amount of earned income and your adjusted gross income is below a certain limit based on your household size, you may be able to claim a credit for your expenses to care for a child under age 13 to allow you to work or attend school. The credit is a percentage of your expenses based on your income level. To claim this credit you need to file Schedule WFC – Oregon Working Family Child Care Credit.
If your Oregon income tax return includes income on which you paid income taxes to another state, you can claim a credit for those taxes on your Oregon return. You must attach a copy of the return you filed with the other state and proof of payment of the tax. If you are a resident of Oregon the entire year and had income taxed by Arizona, California, Indiana, or Virginia, you cannot claim a credit on your Oregon return. But you can claim a credit on a nonresident return you file with those states.
Other credits
There are various credits that business owners and others may qualify to claim on their individual Oregon income tax returns. You can find more information on these credits on the Oregon Department of Revenue website under Credits.
Sources: Exempt Income Schedule for Enrolled Members of a Federally Recognized American Indian Tribe – Oregon Department of Revenue
Form 40 – Individual Income Tax Return – Oregon Department of Revenue
Form 40, Form 40S, Schedule WFC, and instructions – Oregon Department of Revenue
Form SPS – Severance Pay Subtraction – Oregon Department of Revenue Personal Income Tax – Credits – Oregon Department of Revenue
Personal Income Tax – General Information – Oregon Department of Revenue
Residential Energy Tax Credits – Oregon Department of Energy
Schedule WFC – Oregon Working Family Child Care Credit – Oregon Department of Revenue
