How Does Oregon Income Tax Work?

Oregon’s progressive income tax, Paid Leave Oregon program, and local transit payroll taxes create unique responsibilities for employers. This article breaks down what you need to know about managing Oregon income tax—from withholding to reporting—and how you can automate updates, filings, and payments to stay compliant.

What makes Oregon's state income tax unique

Oregon has a progressive state income tax but no statewide sales tax. Consequently, the state relies heavily on personal income, property, and corporate activity taxes.

Because remote and hybrid work are common, employers have to track where work is physically performed. If an employee performs services in Oregon—even partially—state withholding and unemployment contributions may apply.

How income tax works in Oregon

The Oregon Department of Revenue administers a progressive personal income tax system. Rates for the 2025 tax year range from 4.75% to 9.90% depending on filing status and taxable income.

Oregon state income-tax rates and brackets (2025)

Employers must withhold Oregon income tax using the official Withholding Tax Formulas. Here’s a look at the state’s filing statuses, taxable income ranges, and rates for 2025.

Brackets are adjusted annually for inflation, and taxable income is based on federal taxable income with Oregon-specific additions/subtractions. Oregon also imposes local transit payroll taxes in certain jurisdictions (TriMet and Lane Transit District), which we detail later on in this article.

Residency rules and filing status

Oregon’s filing statuses include: single, married filing jointly, married filing separately, head of household, or qualifying surviving spouse. Residency determines who pays Oregon income tax:

• Residents: All income is taxed
• Part-year residents: Taxed on all income while resident and Oregon-source income while nonresident
• Nonresidents: Taxed only on Oregon-source income

Employers must update withholding when employees move into or out of Oregon.

Oregon income-tax deductions and credits

Oregon starts with federal taxable income and applies state-specific additions, subtractions, and credits. Common credits/deductions include:

• Oregon Earned Income Credit (a percentage of the federal EIC)
• Subtraction for a portion of federal tax liability
• Deductions for certain retirement income, charitable gifts, and medical expenses (when itemizing)

Learn more about Oregon’s tax benefits and state-specific credits.

Filing and payment details

For individuals

• Forms: OR-40 (resident), OR-40-P (part-year), OR-40-N (nonresident)
• Deadline: April 15, 2026 (for 2025 returns)
• Method: File via Revenue Online or by mail; payments accepted electronically or by check

See the official state website for up-to-date Oregon tax forms and filing directions.

For employers

• Register: Obtain a Business Identification Number (BIN) from the Oregon DOR
• Withholding reports: File quarterly Combined Payroll Tax Reports (Forms OQ & 132)
• UI reporting: File and pay via OED Employer Account Portal
• Paid Leave Oregon: Remit PLO contributions (1%) through the same portal
• New hire reporting: Report within 20 days to the Oregon New Hire Reporting Center
• Record keeping: Maintain accurate wage records for state and federal compliance

Other employer-related taxes (2025)

Aside from income tax, Oregon also has taxes related to unemployment insurance, paid leave, transit payroll tax, and the workers’ benefit fund that employers need to be aware of:

What employers and workers should know about Oregon taxes

Payroll implications

Employers must ensure payroll systems apply the correct withholding rates and local tax rules. Oregon lacks a sales tax but adds complexity through UI, paid leave, WBF assessments, and transit taxes.

Multi-state and remote work considerations

Remote workers performing any services in Oregon create tax nexus. Employers should adjust withholding and register with the DOR and OED for each jurisdiction.

Business obligations

If you have employees in Oregon, make sure you’re following the 2025 unemployment insurance (UI) wage base of $54,300 and apply the 1.0% Paid Leave Oregon contribution, split between employees (0.6%) and employers (0.4%).

You’re also required to withhold local transit taxes in applicable districts and file Combined Payroll Tax Reports quarterly, ensuring timely remittance of Workers’ Benefit Fund (WBF) assessments through the state’s combined reporting system.

Simplify Oregon payroll management with Deel

Managing payroll in Oregon means keeping pace with progressive income tax rates, UI and Paid Leave contributions, and local assessments. These obligations change annually and require accurate calculation and timely filing.

Deel Payroll - US streamlines this process by automating rate updates, filings, and compliance checks. For comprehensive coverage, Deel PEO manages all aspects of employment compliance, ensuring businesses can focus on growth instead of tax logistics.

Simplify payroll and compliance in Oregon with Deel—built to make payroll tax management fast, compliant, and effortless in the US and beyond.

Book a free 30-minute platform demo with an expert to learn more.