Military pay isn't taxed by Oregon for those who are stationed in Oregon but are domiciled outside of Oregon. Read Publication OR-17
for more information about "domicile." Active service military personnel in Oregon are treated as nonresidents if their address in the payroll records of the Defense Finance and Accounting Services (DFAS) is outside Oregon, regardless of where domiciled.
Nonresidents stationed in Oregon
Oregon doesn't tax your military pay while you are stationed in Oregon. File an Oregon Form OR-40-N if you or your spouse had income from other Oregon sources. Oregon-source income includes wages from an off-duty job or earnings from an Oregon business or rental property.
If you had Oregon tax withheld from your military pay, you can file a return to claim a refund.
Residents stationed in Oregon
If you are an Oregon resident stationed in Oregon, file Form OR-40. Up to $6,000 of your military pay may qualify for a subtraction (see subtraction information below).
Residents stationed outside Oregon
You're a nonresident for Oregon tax purposes if you meet all of the following requirements:
- You didn't have a permanent residence in Oregon for yourself or your family during any part of the tax year.
- Your permanent residence was outside Oregon during the entire tax year.
- You spend less than 31 days in Oregon during the tax year.
You'll only owe Oregon tax if you had income from other Oregon sources. If you have to file a return, use Oregon Form OR-40-N.
You have the option to stop Oregon withholding from your military pay if all of the following are true:
- You had a right to a refund of all 2021 Oregon income tax withheld because you had no tax liability.
- You expect a refund of all 2022 Oregon income tax withheld because you resonable believe you won't have any tax liability.
- You expect to be stationed outside of Oregon all of 2022.
To stop Oregon withholding, you must use Oregon Form OR-W-4 to claim that your pay is exempt from Oregon tax. Enter the appropriate code from the table inside form OR-W-4 Instructions and write "Exempt" on the form as instructed. Give the completed form to your pay clerk. Submit a new form by February 15 each year that your income is exempt.
Military pay subtractions
You may qualify for one or more of the subtractions below if your federal Adjusted Gross Income (AGI) includes military pay. Military pay includes active duty pay; reenlistment bonuses; and pay for guard and reserve annual training, weekend drills, and inactive duty training.
- Stationed outside Oregon—For military pay earned while stationed anywhere outside Oregon.
- Guard and reserve away from home—For military pay earned by National Guard members or reservists assigned away from home 21 days or more.
- Other military pay—For any remaining taxable military pay after taking the above subtractions, up to $6,000.
Your total subtraction can't be more than the total military pay included in federal AGI. Military pay not included in federal AGI isn't taxed by Oregon and can't be subtracted.
Spouses of military personnel
The federal Military Spouse Residency Relief Act (MSRRA) prevents Oregon from taxing your Oregon wages if:
- You moved to Oregon only to be with your spouse who is stationed here, and
- You are both domiciled outside of Oregon.
Under the federal Servicemembers Civil Relief Act, for tax purposes, you may elect to be treated as a resident of the state where the military member is domiciled.
Note: This exemption doesn't apply to spouses who are also members of the military.
Oregon resident spouse living outside of Oregon
Do you qualify to be treated as a nonresident because you meet the special case Oregon resident requirements? If so, your out-of-state wages or self-employment income isn't taxed by Oregon, even if the other state can't tax it under MSRRA. You don't have to file a return unless you had Oregon tax withheld or other Oregon-source income, such as rental income or retirement pay. If you have to file a return, use Form OR-40-N.
Interest and collections
If you owe taxes while on active duty, you may qualify for a reduced interest rate while on active duty and up to six months.
If your active duty service affected your ability to pay your Oregon tax liability, you may qualify for relief interest and collection activity if you meet all of these requirements:
- Your tax liability became due while you were on active duty under Title 10.
- You were on active duty for more than 90 consecutive days.
- Your active duty service occurred on or after September 11, 2001.
- You notify us within six months after your active duty service has ended.
Guard members called into active state service by the governor under Title 32 may also qualify for relief interest and collection activities on any tax owed prior to active state service.
Send us your request and documents showing your active duty status and dates within six months of your service ending.