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Tool | August 2013

State-by-State Guide to Taxes on Retirees

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Oregon

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The Bottom Line
Map of Oregon

NOT TAX-FRIENDLY

One of Kiplinger's top ten least tax-friendly states for retirees, the Beaver State's top rate of 9.9% is applied to taxable income over $125,000 ($250,000 for married couples filing jointly). Although Oregon does not tax Social Security benefits, most other retirement income is taxed at your top income tax rate. However, you can deduct up to $6,100 of federal income taxes paid from your Oregon return, and there is a retirement-income credit for seniors with certain income restrictions. One bright spot in Oregon's tax picture is its absence of a sales tax. You can buy anything in the state and never pay a penny in sales taxes. There is a Senior Citizen Property Tax Deferral program, but income limits apply.

State Sales Tax

None.

Income Tax Range

Low: 5% (on up to $3,250 of taxable income for single filers and up to $6,500 for married couples filing jointly)

High: 9.9% (on taxable income over $125,000 for single filers and over $250,000 for married couples filing jointly)

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Most new residents will find that their pension income, along with most other income, is taxed by Oregon. If you receive a U.S. government pension, however, you may be entitled to subtract part or all of that pension on your Oregon individual income tax return. The state also does not tax Railroad Retirement benefits. And depending on your age and income, you may be entitled to a retirement-income credit on your Oregon return. The credit is the lesser of your tax liability or 9% of taxable pension income. Oregon also allows a credit for the elderly or disabled if you qualify for the federal elderly-or-disabled credit; however, you cannot claim this credit if you are claiming the retirement-income credit. The Oregon elderly-or-disabled credit is 40% of the federal credit.

Oregon allows residents to subtract their current year's federal income tax liability, after credits, up to $6,100, based on income and filing status.

Property Taxes

Property is assessed at 100% of market value. Counties assess properties and set tax rates. The maximum assessed value cannot increase by more than 3% each year on properties that have not undergone major improvement projects, such as an addition or subdivision. Median property tax on the state's median home value of $257,400 is $2,241, according to the Tax Foundation.

Tax breaks for seniors: Homeowners 62 and older may delay paying property taxes based on certain income criteria. With the Property Tax Deferral for Disabled or Senior Citizens program, the state pays the taxes to the county, maintains the account and charges 6% interest, which is also deferred. Taxes are owed when the taxpayer receiving the deferral dies, sells the property, no longer lives permanently on the property, or the property changes ownership. To qualify, the taxpayer must live on the property and have a total household income of less than $41,500 in 2013.

Inheritance and
Estate Taxes

In 2012, Oregon's inheritance tax changed to an estate tax. The filing threshold of $1 million remains. Rates increase from 10% to 16% between $1 million and $9.5 million. The maximum is 16%.

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