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Income

Introduction

Full-year residents (Form 40). You are taxed on income from all sources.

Part-year residents (Form 40P). You are taxed on income from all sources earned or received while an Oregon resident. For the period of time you were not an Oregon resident, Oregon taxes only certain income from Oregon sources. See "Nonresidents" below.

Non-residents (Form 40N). You are taxed on income from Oregon sources. This includes income shown on your federal return from Oregon wages or Oregon fees or for services performed in Oregon. Other income from Oregon sources includes:
  • Businesses, S corporations, partnerships, and limited liability companies taxed as partnerships located or doing business in Oregon.
  • Unemployment compensation received because of an Oregon job.
  • Severance pay you received because of an Oregon job.
  • Oregon farms.
  • Oregon estates and trusts.
  • Sales of Oregon property.
  • Rents and royalties for use of Oregon property.

Note: Community property income. Oregon is not a community property state. If you're a resident of Oregon and your spouse/RDP is a resident of a state with community property laws, you may be taxed on part of your spouse's/RDP's income. Community property laws in the state where your spouse/RDP lives determine if you are taxed on any of your spouse's/RDP's income. Check with the state where your spouse/RDP lives for more information about community property.

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Air carrier employees

OAR 150-316.127-(E)

Nonresidents. You are exempt from Oregon tax on wages earned while working on aircraft in Oregon, if you meet all of the following qualifications:

  • You are a nonresident of Oregon; and
  • You perform regularly assigned duties on aircraft in Oregon and at least one other state as an employee of an air carrier; and
  • Your scheduled flight time in Oregon is 50 percent or less of your total scheduled flight time during the calendar year.

Additionally, the air carrier you work for must provide:

  • Interstate or foreign air transportation of passengers  or property by aircraft as a common carrier for compensation; or
  • Interstate or foreign transportation of mail by aircraft.

If you are a federal, state, or local government employee, you may not exclude your income under
this section. (U.S. Postal Service employees are considered employees of the federal government.)
If you meet all of these qualifications, file Form 40N and write “air carrier” at the top of your return in
blue or black ink. Show your income is exempt by excluding it from the Oregon column. If all of your
wages are exempt, enter a zero in the Oregon column.

Example 1: Leslie is a nonresident who works as a pilot for an Oregon-based corporation, transporting
the corporation’s executives to various job locations in the United States. Leslie is not exempt from Oregon tax because she does not work for an air carrier that provides air transportation for compensation. Her wages are subject to Oregon tax to the extent services are performed in Oregon.

Example 2: George is a nonresident who works as an office manager for an air carrier. Each calendar
year, he works as a substitute pilot outside of Oregon in order to log the minimum amount of flight time required to retain his pilot’s license. George does not qualify as exempt from Oregon tax because his “regularly assigned duties” are not on an aircraft, but as a manager in an office.

Example 3: Allison is a nonresident and works as a flight attendant for Delta Airlines. She regularly
works on flights in California, Oregon, and Washington. Her scheduled flight time in Oregon amounts to 35 percent of her total scheduled flight time this year. Because Allison meets the qualifications mentioned above, she can exclude, from the Oregon column, all of her wages from Delta Airlines on her Oregon return.

To stop withholding of Oregon income tax from your exempt wages, complete Form W-4 and write “exempt” on line 7. At the top of Form W-4 write “For Oregon Only–Air Carrier Employee.” Give this Form W-4 to your payroll clerk.

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Alimony received

Full-year residents. Oregon taxes all alimony you received during the year.

Part-year residents. Oregon taxes any alimony you received for the part of the year you were a resident of Oregon.

Nonresidents. Oregon does not tax any alimony you received while a nonresident of Oregon.

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Business income or loss

Full-year residents. Oregon taxes all of your business income (or allows your business loss) received during the year.

Part-year residents. Oregon taxes all of your business income (or allows your business loss) while you're an Oregon resident. Add to this figure the amount of income (or loss) from an Oregon business while a nonresident.

Nonresidents. Oregon taxes your income (or allows your loss) from an Oregon business. This includes apportioned business income and allocated nonbusiness income from sole proprietorships.

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Gain, loss, and distributions

Capital gain, loss, and distributions

Full-year residents. Oregon taxes your gain or distribution (or allows your loss) received during the year. Limit net losses to $3,000 ($1,500 if married/RDP filing separately). The capital loss carryforward allowed on your full-year Oregon return will be the same carryforward allowed on your federal return.

Part-year residents. Oregon taxes your gain or distribution (or allows your loss) while an Oregon resident. Add to this figure the amount from Oregon sources while a nonresident. Limit net losses to $3,000 ($1,500 if married/RDP filing separately). If you're an Oregon resident at the end of the year, your capital loss carryforward for Oregon is the same as the amount allowed on your federal return.

Nonresidents. Oregon taxes your gain or distribution (or allows your loss) from Oregon sources. Limit net losses to $3,000 ($1,500 if married/RDP filing separately).

Other gain or loss

Full-year residents. Oregon taxes your gain (or allows your loss) received during the year.

Part-year residents. Oregon taxes your gain (or allows your loss) while an Oregon resident. Add to that figure the amount from Oregon sources while a nonresident.

Nonresidents. Oregon taxes your gain (or allows your loss) from Oregon sources.

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Hydroelectric dam workers

ORS 316.127(8)

Full-year residents. Oregon taxes all of your wages earned while working on the McNary, John Day, The Dalles, or Bonneville dams.

Part-year residents. Follow the same instructions in "Nonresidents" text, but exempt only the wages earned during the part of the year you were a nonresident of Oregon. If you qualify, file Form 40P and exclude the wages you earned while working on any of the dams identified below.

Nonresidents. You are exempt from Oregon tax on wages earned while working on the McNary, John Day, The Dalles, or Bonneville dams. If you qualify, Oregon will not tax these wages. File Form 40N and show this income is exempt by entering a zero in the Oregon column for these wages. If you have any other Oregon income from Oregon sources, you must show that income in the Oregon column. Write the name of the dam you work on in blue or black ink across the top of your return.

To stop withholding of Oregon income tax from your exempt wages, complete Form W-4 and write "exempt" on line 7. At the top of Form W-4 write "For Oregon Only - (name of the dam)." Give this Form W-4 to your payroll clerk.

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Interest and dividend income

Interest

Generally, interest income is only taxed by your state of residence. It includes any interest received or credited to your account that you could withdraw and any interest you received on tax refunds.

Full-year residents. Oregon taxes the taxable interest income you received and reported on your federal return.

Part-year residents. Oregon taxes the taxable interest income you received while you were an Oregon resident. Oregon also taxes Oregon business activity interest income received while a nonresident.

Nonresidents. Oregon taxes the interest income you received on funds used for business activity in Oregon. Oregon does not tax interest received on installment sales.

Dividends

Generally, dividend income is only taxed by your state of residence. Include the stock dividends you received under a public utility dividend reinvestment plan in Oregon income.

Full-year residents. Oregon taxes the dividends you received during the year.

Part-year residents. Oregon taxes all dividends you received while an Oregon resident that are included on your federal return. Oregon also taxes any S corporation or partnership dividends taxable to you during the part of the year you were a nonresident.

Nonresidents. Oregon taxes dividends passed through to you from an S corporation or partnership that has no business activity outside Oregon. These are dividends your S corporation or partnership received on the stock of another corporation.

Exceptions:

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Interstate Transportation Wage

(Amtrak Act)

OAR 150-316.127-(E)

Nonresidents. Are you a nonresident of Oregon with regularly assigned duties in Oregon and at least one other state? If you meet the qualifications below, Oregon will not tax you on these wages. File Form 40N and show this income is exempt by entering a zero in the Oregon column for these wages. Write “Amtrak” at the top of your return in blue or black ink.

The Amtrak Reauthorization and Improvement Act of 1990, Public Law 101-322, prohibits states and local governments from taxing compensation of certain nonresident employees who have regularly assigned duties in more than one state.

If you are a federal, state, or local government employee, you may not exclude your income under
the Amtrak Act. (U.S. Postal Service employees are considered employees of the federal government.)

Who qualifies?
To qualify, you must work for:

  • An interstate railroad, or
  • An interstate motor carrier, or
  • An interstate motor private carrier.

In addition, you must:

  • Be a nonresident of Oregon, and
  • Have regularly assigned duties in more than one state. This means you perform duties in each state on a regular basis. Duties you perform on an “on-call” or “as-needed” basis or on a sporadic or intermittent basis during the year are not considered “regularly assigned duties,” and
  • Be subject to the jurisdiction of the U.S. Secretary of Transportation.
  • Are not covered under the overtime requirements of the Fair Labor Standards Act.

For employees of interstate motor carriers or motor private carriers, in the course of employment, you
must:

  • Directly affect the safety of a commercial motor vehicle. This means you are required by your regularly assigned routine and duties to work directly with a commercial motor vehicle or its contents. The duties must be direct and hands-on, requiring you to physically move, touch, or affect the vehicle or its contents. Supervisory, managerial, consulting, or other duties that indirectly affect the safety of a motor vehicle do not meet the definition of “directly affects,” and
  • Work as:
    • An operator of a commercial motor vehicle,
    • A mechanic,
    • A freight handler, or
    • Someone, other than an employer, who directly affects the safety of a motor vehicle.

A commercial motor vehicle is any self-propelled or towed vehicle used on highways in interstate commerce to transport passengers or property if such vehicle:

  • Has a gross vehicle weight rating of more than 10,000 pounds,
  • Is designed or used to transport passengers for compensation, except for vehicles providing taxi cab service when the vehicle has a capacity of eight or fewer passengers and is not operated on a regular route or between specified places,
  • Is designed to transport more than 15 passengers, including the driver, and is not used to transport passengers for compensation, or
  • Is used and labeled for the transportation of hazardous materials.

Example 1: Adam is a nonresident who works for an Oregon interstate motor carrier as a commercial motor vehicle driver. He has a regular route from Idaho to Oregon, delivering products in Oregon.
Because Adam is the driver of a commercial motor vehicle and has regularly assigned duties in more than one state, this income is exempt from Oregon tax. Adam must file Form 40N and show this income is exempt by entering a zero in the Oregon column for these wages.

Example 2: Brenda is a nonresident who works for an interstate motor carrier as a mechanic directly affecting the safety of commercial motor vehicles engaged in interstate commerce. She has regular duties in a Washington terminal and an Oregon terminal. She works one day a week in Washington and four days in Oregon. 

Because Brenda directly affects the safety of a commercial motor vehicle in interstate commerce and performs regularly assigned duties in two states, she is exempt from Oregon tax. It does not matter that the majority of her work is performed in Oregon. Brenda must file a Form 40N and show this income is exempt by entering a zero in the Oregon column for these wages.

Example 3: Jorge is a nonresident who works as a mechanic for an interstate motor carrier, directly affecting the safety of commercial motor vehicles engaged in interstate commerce. He regularly works in Medford but is required to be on-call some weekends to perform minor repair work. Several times a year he may travel to California to repair a flat tire, do minor engine work, etc. 

Jorge does not have regularly assigned duties in more than one state. Duties that are performed on an on-call or as-needed basis are not considered to be regularly assigned. Jorge’s wages earned in Oregon are taxable by Oregon. He must file Form 40N and report his wages in the Oregon column.

Example 4: Carl is a nonresident who works for an interstate motor carrier as a driver. Carl picks up a lumber delivery truck every morning in Washington and receives delivery assignments for the day. Depending on where the lumber needs to be delivered, he may not come to Oregon on a daily basis. Carl may pick up and deliver lumber only within Washington or only within Oregon. Carl does drive to Oregon at least once a month. Carl’s wages earned in Oregon are exempt from Oregon tax. Carl must file Form 40N and show this income is exempt by entering a zero in the Oregon column for these wages.

Due to the nature of the business, the company may not be able to assign regular duties to Carl. The company itself does not know what each day’s delivery route will be until customers place orders. Although Carl may not have a regular route in Washington and Oregon, he does drive to Oregon at least once a month. Carl is considered to have regularly assigned duties in two states, as long as all routes are assigned randomly among all drivers on a regular basis.

Example 5: Ed is a nonresident who works for an Oregon wholesaler as a shipping clerk. The company has one terminal in Oregon and one terminal in Washington. Ed regularly works in both terminals.
That is, he has regularly assigned duties in two states. 

Ed is not considered exempt within the scope of the Amtrak Act. He is not a driver, mechanic, or freight handler. His duties do not directly affect the safety of the vehicle. Ed’s wages earned in Oregon are taxable by Oregon. He must file Form 40N and include his income in the Oregon column.

Example 6: Frieda is a nonresident who works for an Oregon retail store as a freight handler. Her regularly assigned duties are to load and unload freight. Occasionally, Frieda is asked to fill in as a driver and, over the course of a year, may drive several routes in and out of Oregon. Frieda does not have “regularly assigned duties in more than one state” and she does not work for an interstate motor carrier. Her Oregon-source wages are taxable by Oregon. Frieda must file Form 40N and include her income in the Oregon column.

Example 7: Butch is a nonresident who works for an Oregon-based interstate trucking carrier as a supervisor. His regular duties within the state of Oregon include safety training. However, Butch frequently also drives to Washington to conduct safety training.

Supervisory duties do not qualify as exempt under the Amtrak Act. The employee must directly affect the safety of a commercial vehicle. Conducting safety training only indirectly affects the safety of a commercial motor vehicle. Butch’s wages are taxable by Oregon. He must file Form 40N and include his income in the Oregon column.

Example 8: Connie Sue is a nonresident who works for an interstate trucking carrier at her company’s Oregon and Washington yards. She has a variety of duties, including helping load trucks. Connie Sue is allowed overtime under the Fair Labor Standards Act. 

Because she is covered under the Fair Labor Standards Act rather than being subject to the jurisdiction of the Secretary of Transportation, Connie Sue does not qualify for the Amtrak relief. Her wages are taxable by Oregon. She must file Form 40N and include her income in the Oregon column.

Example 9: Ken is a nonresident who works as a line repairman for a utility company. He uses a company truck with a gross vehicle weight of more than 10,000 pounds to make service calls in both Oregon and Washington.

Ken is not exempt from Oregon taxation because he does not drive a “commercial motor vehicle” (a motor vehicle used to transport passengers or property). Ken’s Oregon wages are taxable by Oregon. He must file Form 40N and include his income in the Oregon column.

Employer withholding
If you are exempt from Oregon taxation under the Amtrak Act, Oregon tax does not have to be withheld from your wages. You may claim exemption from withholding on the W-4 you file with your employer. On the W-4 write “For Oregon Only—Amtrak.” Attach to Form W-4 an explanation of qualifying duties. You must still file an Oregon tax return even if you claim exemption from withholding under the Amtrak Act.

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IRA distributions

Full-year residents. Oregon taxes any taxable IRA distribution you received during the year and any amounts reported in federal income that you converted from a regular IRA into a Roth IRA.

Part-year residents. Oregon taxes any taxable IRA distribution you received while you were an Oregon resident. Oregon also taxes income amounts from IRA conversions if you were an Oregon resident at the time of the conversion.

Nonresidents. Oregon does not tax any amount unless you are a nonresident domiciled in Oregon. If you are domiciled in Oregon but otherwise taxed as a nonresident, your Oregon-source IRA will still be taxed by Oregon. See the "Retirement income" section below.

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Property, like-kind exchange or conversions

ORS 316.738, 317.327

You may elect to defer gain on like-kind property that is exchanged or converted. Generally, it does
not matter if the properties being exchanged or converted are located in or outside Oregon. Include Oregon Form 24, Oregon Like-Kind Exchanges/Involuntary Conversions, with your Oregon return in the year of the exchange or conversion. Download the form from our website or call us to order it.

Full-year residents. You will report the gain to Oregon when it’s reported on your federal return.

Part-year residents. If you were an Oregon resident at the time you exchanged your property and
deferred the gain, you will report the Oregon portion of the gain when you report the gain on your federal return. If you were a nonresident at the time you exchanged your Oregon property and deferred the gain, see the “Nonresident” section below.

Nonresidents. If you are not an Oregon resident when the gain is reported on your federal return, you will need to file an Oregon Form 40N to report the gain.
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Rents, royalties, partnerships, estates, trusts, farms, etc.

From federal Schedules E and F

Full-year residents. Oregon taxes the amount of rent, royalty, Real Estate Mortgage Investment Conduits (REMIC), Real Estate Investment Trust (REIT), partnership, S corporation, estate, trust, and farm income you received while an Oregon resident.

Part-year residents. Oregon taxes the amount of rent, royalty, REMIC, REIT, partnership, S corporation, estate, trust, and farm income you received while you were an Oregon resident. Oregon also taxes the income you received from Oregon sources while a nonresident.

Nonresidents. Oregon taxes the amount of rent, royalty, REMIC, REIT, partnership, S corporation, estate, trust, and farm income you received or earned from Oregon sources.

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Retirement income

Full-year and part-year residents. Most retirement income is subject to Oregon tax when received by an Oregon resident. This is true even if you were a nonresident when you earned the income. However, you may subtract some or all of your federal pension income from Oregon income. 

For other exceptions, see Previously taxed employee retirement plans and Previously taxed IRA conversions.

Nonresidents. Oregon does not tax your retirement income if you are a nonresident who is not domiciled in Oregon. If you are an Oregon nonresident who is still domiciled in Oregon, any Oregon-source retirement income is taxable by Oregon. This applies to most forms of retirement income taxed by Oregon, including public pension plans, corporate retirement plans, Keogh plans, simplified employee pensions (SEPs), and IRAs. For the definition of “domicile,” see the Residency section.

Example: Hiro has always resided and worked in Oregon. On January 5, 2013, he retired, sold his Oregon residence, and moved temporarily to Arizona to work. He intends to remain in Arizona for two years and then return to Oregon.

He did not acquire another residence outside Oregon. He receives an Oregon-sourced pension and interest income.

Hiro has not given up his Oregon driver’s license, and his vehicles are registered with the state of Oregon. He has not changed his voter registration to another state.

Hiro has not shown an intent to give up Oregon as his home and acquire a permanent home elsewhere. Based on these facts, Hiro is domiciled in the state of Oregon. Although Hiro is taxed as a nonresident (his interest income is not taxed by Oregon),Oregon source retirement income is taxable by Oregon.

Retirement income means income from:

  • Qualifying employer pension and profit-sharing plans exempt from tax under Internal Revenue Code (IRC) Section 401(a).
  • Annuity plans [IRC Sec. 403(a) and IRC Sec. 403(b)].
  • Cash or deferred compensation arrangements [IRC Sec. 401(k) plans and IRC Sec. 457 plans].
  • Simplified employee pension plans [IRC Sec. 408(k)].
  • Individual retirement arrangements [IRC Sec. 408(a) and IRC Sec. 408(b)].
  • Plans for federal, state, or local government employees [IRC Sec. 414(d)].
  • Pay for uniformed service members under chapter 71 of Title 10 of the United States Code.
  • Trusts that were created before June 25, 1959 [IRC Sec. 501(c)(18)].

Payments received after termination of employment qualify if the payment is made under a plan,
program, or arrangement maintained solely for the purpose of providing retirement benefits that exceed the amounts allowed under the qualified retirement plans described above.

Payments received from nonqualified deferred compensation plans [as described in IRC Sec. 3121(v)(2)(C)] qualify if the payments are part of a series of substantially equal periodic payments made:

  • For the life or life expectancy of the recipient, or 
  • For a period of at least 10 years.

Retirement income does not include income received from:

  • Social Security,
  • Stock options,
  • Restructured stock plans,
  • Severance plans, or
  • Unemployment compensation.

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Social Security and Railroad Retirement Board benefits

Oregon does not tax any amount of your Social Security, Railroad Retirement Board, or railroad unemployment benefits. For information see Railroad Retirement Board benefits subtraction.

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State and local income tax refunds

Full-year residents. Oregon does not tax Oregon state and local income tax refunds you received during the year.

Part-year residents. Oregon does not tax Oregon state and local income tax refunds you received while an Oregon resident. For the part of the year you were a nonresident, see below.

Nonresidents. Oregon taxes other state and local income tax refunds you deducted on an Oregon return in a prior year. For information, see the Oregon income tax refund subtraction section.

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Unemployment compensation and other taxable income

Full-year residents. Oregon taxes unemployment compensation and any other taxable income you received during the year.

Part-year residents. Oregon taxes unemployment compensation and any other taxable income you received while an Oregon resident. Oregon also taxes any unemployment compensation and other taxable income from Oregon sources or based on Oregon sources received while a nonresident.

Nonresidents. Oregon taxes any unemployment compensation and any other taxable income included in federal adjusted gross income received from Oregon sources or based on Oregon sources.

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Wages, salaries, and other pay for work

Full-year residents. Oregon taxes all of your earnings for services you performed inside and outside Oregon.

Part-year residents.* Oregon taxes all of your earnings while an Oregon resident. Oregon also taxes the amount you earned working in Oregon while you were a nonresident. If your Oregon wages are not stated separately on your W-2, compute your Oregon-source income using the formula below.

Nonresidents.* Oregon taxes the income you earned while working in Oregon. Oregon does not tax any amount you earned while you were working outside Oregon.

If the amount you earned working in Oregon differs from the Oregon wages shown on your Form W-2, you must include a signed explanation from your employer, on company letterhead, with your Oregon return, and compute your Oregon-source income using the formula below

Important information for using this formula: When you count the number of days you actually worked in Oregon and the number of days you actually worked everywhere, do not include holidays, vacation days, or sick days. These aren't days that you actually worked. Your employer paid you for these days based on the days you worked. However, include your sick pay, holiday pay, and vacation pay in total wages.

Use the formula below to determine total wages taxable by Oregon.


Days actually worked in Oregon     x​ ​ ​ ​Total
wages
​ ​= ​ ​Oregon wages
Total days actually worked everywhere
 

If you only worked in Oregon, do not use the formula above. All your earnings are taxable by Oregon, and you must report them on your Oregon return.

* Nonresident exceptions: To see if you qualify to exclude certain income, go to Air carrier employees; Interstate transportation wages (Amtrak Act); Hydroelectric dam workers; or Waterway workers below.

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Waterway worker

ORS 316.127

Full-year residents. Oregon taxes all the income you earned while working on a watercraft in interstate waters.

Part-year residents. Oregon taxes all the income you earned while working on a watercraft in interstate waters during the part of the year you were an Oregon resident. For the part of the year you were a nonresident, see below.

Nonresidents. Certain nonresident employees serving on watercraft who have regularly assigned duties on interstate navigable waters are not subject to Oregon income tax.

To qualify you must:

  • Be engaged on a vessel to perform assigned duties in more than one state as a pilot licensed under 46 U.S.C. 7101 or licensed or authorized under the laws of the state, or
  • Perform regularly assigned duties while engaged as a master, officer, or member of a crew on a vessel operating on navigable waters in two or more states.

If you qualify, Oregon will not tax these wages. File Form 40N (or Form 40P if a part-year resident) and show this income is exempt by entering a zero in the Oregon column for these wages. Write "Waterway Worker" at the top of your return in blue or black ink.

To stop withholding of Oregon income tax from your exempt wages, complete a Form W-4 and write "exempt" on line 7. At the top of Form W-4 write "For Oregon Only - Waterway Worker." Give this Form W-4 to your payroll clerk.

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