Oregon has a graduated income tax reaching 9.90% - one of the highest top rates in the nation. Oregon is one of five states with no sales tax. Oregon uses rolling IRC conformity, meaning the OBBBA tips and overtime deductions automatically reduce Oregon taxable income. Employees also contribute 0.60% of wages to Paid Leave Oregon for paid family and medical leave.
State Income Tax
4.75% â 9.90%
State Sales Tax
None
Paid Leave Oregon (employee)
0.60% of wages
Oregon Income Tax Brackets 2026
Oregon has four graduated brackets. The 2026 thresholds are confirmed from the Oregon Withholding Tax Formulas (Form 150-206-436, Rev. 12-31-25). Oregon also allows a federal income tax subtraction (up to $8,750 for 2026) that reduces Oregon taxable income - this is a unique feature among states and significantly reduces the effective Oregon rate for many taxpayers.
Taxable Income (Single)
Rate
$0 â $4,550
4.75%
$4,550 â $11,400
6.75%
$11,400 â $125,000
8.75%
Over $125,000
9.90%
Paid Leave Oregon
Oregon's Paid Leave program funds paid family and medical leave through a 1.0% total contribution. Employees contribute 0.60% of gross wages; employers with 25 or more employees contribute the remaining 0.40%. Employers with fewer than 25 employees are exempt from the employer share but must still withhold the employee portion. There is no wage cap. Paid Leave Oregon provides up to 12 weeks of paid leave for qualifying events.
Oregon Has No Sales Tax
Oregon is one of only five states (along with Alaska, Delaware, Montana, and New Hampshire) with no state or local sales tax of any kind. All purchases - groceries, clothing, electronics, vehicles - are sales-tax free throughout Oregon. Oregon compensates for this through higher income tax rates.
Oregon uses a graduated income tax with four brackets: 4.75%, 6.75%, 8.75%, and 9.90%. The top rate of 9.90% is among the highest in the nation. For single filers, the top bracket begins at $125,000. Oregon also applies a federal income tax subtraction (up to $8,750 for 2026) that reduces Oregon taxable income for taxpayers who paid significant federal income tax.
Does Oregon conform to the OBBBA tips and overtime deductions?
Yes - Oregon conforms to the OBBBA tips and overtime deductions via rolling IRC conformity for changes to the definition of federal taxable income. The 2025 OR-40 instructions explicitly state: "New federal deductions. You may be able to claim the same deductions for tip income, overtime wages, and passenger vehicle loan interest that you are claiming on your federal return." This makes Oregon one of the clearest conformity states for the OBBBA deductions.
Does Oregon have a sales tax?
No. Oregon is one of only five states with no state or local sales tax. This applies across all purchase categories - groceries, clothing, vehicles, and all other goods are sales-tax free. Oregon raises revenue primarily through its income tax, which has one of the highest top rates in the nation at 9.90%.
What is Paid Leave Oregon and how does it affect my paycheck?
Paid Leave Oregon deducts 0.60% of gross wages from employee paychecks to fund paid family and medical leave. The total contribution is 1.0% - employees pay 60% (0.60%) and employers with 25 or more employees pay the remaining 40% (0.40%). There is no wage cap. Paid Leave Oregon provides up to 12 weeks of paid leave for qualifying family, medical, or safe leave events.
Does Oregon tax Social Security and retirement income?
Oregon does not tax Social Security benefits. Most other retirement income - including pensions, 401(k) distributions, and IRA withdrawals - is taxed as ordinary income at Oregon's graduated rates up to 9.90%. A retirement income credit may be available for lower-income retirees. Oregon also allows a deduction for federal income taxes paid (up to $8,750 for 2026 returns), which can reduce Oregon taxable income for retirees with significant federal tax.
Does Oregon have local income taxes?
Most Oregon workers only pay state income tax, but some face local income taxes as well. The Portland Metro Supportive Housing Services Tax applies 1% on taxable income over $125,000 (single) or $200,000 (joint). The Multnomah County Preschool for All Tax adds 1.5% on income above $125,000 single / $200,000 joint. The Oregon Statewide Transit Tax (STT) deducts a small percentage from wages for workers in Oregon. These are separate from the state income tax.
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