Overview of Oregon Retirement Tax Friendliness
Oregon exempts Social Security retirement benefits from the state income tax. Oregon taxes income from retirement accounts like a 401(k) or an IRA, though, at the full state income tax rates. The state has no sales tax, along with property taxes that are slightly below average.
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Oregon Retirement Taxes
From the coast to the Cascade Mountains to the wine regions scattered throughout the state, there are many great places for a retirement in Oregon. Recreational opportunities abound in the Beaver State, but the cost of an Oregon retirement may be too high for some seniors.
Oregon has a relatively high cost of living and a number of retirement tax policies that could put a dent in the budgets of some retirees. Most notably, Oregon taxes income from retirement accounts like a 401(k) or an IRA at the full rates, which range from 4.75% to 9.9%.
That being said, there are a number of other retirement tax policies in Oregon that will benefit many retirees. The state fully exempts Social Security retirement benefits from taxation. It also has no sales tax.
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Is Oregon tax-friendly for retirees?
Oregon is moderately tax-friendly for retirees. As is mentioned above, it exempts Social Security retirement benefits from the state income tax. It also has no sales tax, along with property taxes that are a bit lower than the national average.
Those are both positives for retirees in Oregon, but there are also a few negatives. Unlike many other states, Oregon does not exempt or allow deductions on income from retirement accounts. The state also taxes pension income, although seniors with income below a certain threshold can claim a 9% credit on that income.
Is Social Security taxable in Oregon?
Social Security retirement benefits are not taxed, which means retirees who rely entirely on Social Security for their retirement income will not have to pay any taxes on that income. Federal taxes may be due on Social Security for retirees with multiple income sources.
Are other forms of retirement income taxable in Oregon?
Income from a 401(k), IRA or any other retirement account is taxable at rates ranging from 4.75% to 9.9%. Check out the full Oregon income tax rate tables below.
Pension income is also taxable, but some seniors may be able to claim a credit on that income. The credit is available to seniors with a household income of less than $22,500 (or $45,000 for joint filers) and Social Security income of less than $7,500 (or $15,000 for joint filers). The credit is calculated according to a fairly complicated formula, but it is equal to no more than 9% of your pension income.
How high are property taxes in Oregon?
The average effective property tax rate in Oregon is slightly lower than the national average at 0.92%. However, because home prices in Oregon tend to be fairly high, many Oregon homeowners spend more than $3,350 annually on property taxes.
What is the Oregon Property Tax Deferral for Disabled and Senior Citizens?
If you are at least 62 years old and own your home in Oregon, you may be able to defer payment of property taxes until you sell your house. To qualify, you must have household income of no more than $58,000 in 2024. You also must have owned and occupied your home for at least five years prior to application.
If you do qualify, the state of Oregon will pay all county property taxes for your house. You will still have to pay any school district and municipal taxes. Additionally, the taxes you defer will accrue interest, which you will have to pay back at the time you sell your home.
How high are sales taxes in Oregon?
There is no sales tax in Oregon. For retirees living on a fixed budget, this can add up to hundreds of dollars of savings every year as compared to other states.
What other Oregon taxes should I be concerned about?
Unlike most other states, Oregon has its own estate tax. The exemption amount on that tax is $1 million, which means many estates that are not subject to the federal tax may be taxed in Oregon. The federal exemption is $13.61 million for 2024 and $12.92 million for 2023.
For estates exceeding the state exemption amount, estate tax rates in Oregon begin at 10% and gradually increase up to a top rate of 16%.
