During preparation for the 2026 tax season, we provided incorrect information on the full year resident tax form instructions and information provided to tax preparation software partners regarding calculating Oregon Kids Credit eligibility and refundable credit amount.
As a result, a small number of taxpayers who are ineligible for the Oregon Kids Credit calculated and claimed the Oregon Kids Credit on their returns. An additional small number of taxpayers who are eligible to claim the Oregon Kids Credit claimed too large of a credit.
We are taking steps to correct the problem and provide updates for our software partners.
Taxpayers who have already filed
If you claimed the Oregon Kids Credit and one or more of the new federal deductions for overtime wages, tips, and new car loan interest, the department may need to adjust your return.
You don't need to do anything more. Adjustments may affect the amount of your Oregon Kids Credit and reduce your refund.
If you have additional questions, you can email them to questions.dor@dor.oregon.gov or call 503-947-0350.
Taxpayers who have not yet filed
If you have not yet filed your tax year 2025 Oregon personal income tax return and you believe you may be eligible for the Oregon Kids Credit and one or more of the new federal deductions for overtime wages, tips, and new car loan interest, we recommend that you wait to file your return until your preferred software product has been updated.
We will post updates on this page when approved software products are updated.
Frequently asked questions
We provided incorrect information on the full year resident tax form instructions and to tax preparation software partners about how the new federal income tax deductions for overtime wages, tips, and new car loan interest affect Oregon taxpayers' modified adjusted gross income (MAGI) as it relates specifically to eligibility for the Oregon Kids Credit on their state return. Part-year and nonresident returns are not affected.
As a result, the tax preparation software incorrectly lowered the MAGI for the taxpayers. This increased the amount of Oregon Kids Credit claimed on the returns. The error led some taxpayers not eligible for the Oregon Kids Credit to claim the credit and others to claim more than their allowable credit amount.
The deductions were part of House Resolution 1, also known as the One Big Beautiful Bill, passed by Congress and signed into law after the 2025 Oregon Legislative session ended. The federal legislation made major changes to tax law that were quickly incorporated into DOR forms, instructions, and processes. The agency monitors each filing season closely and we identified the error and solution within days of the season start.
This error has only impacted a small number of returns. You may have been impacted if you are a full year resident and claimed the Oregon Kids Credit AND in 2025 you claimed the new federal deductions for:
- Overtime pay,
- Tips, OR
- New car loan interest
As of the morning of January 30, the number of affected tax returns was fewer than 500. While we expect that number to grow as returns are filed before tax filing software is updated with the fix, we anticipate the full number of impacted returns to remain low. We discovered this error during the first week of return processing, and immediately took action to address the problem. Approximately 2.2 million returns are filed by April 15 each year.
If this error impacts your tax return, we will automatically adjust your return in the coming weeks. When your return is adjusted, a notice will be added to your Revenue Online account, and sent to your mailing address.
Taxpayers who want to know if their return is impacted are encouraged to sign in to their Revenue Online account, or sign up for an account, and regularly check for notices. This page will be updated with information on our progress making these adjustments.
You don't need to do anything more. The Oregon Department of Revenue will correct your return and adjust your refund accordingly.
If you are among the affected taxpayers, your refund may be less than you anticipated when you filed your return. If your return is adjusted, a notice will be sent to your mailing address, and your Revenue Online account.
Because we discovered this error quickly, we currently do not anticipate any delays in refunds for affected returns. Refunds will begin being issued on February 17, and returns are processed in the order they are received.
Due to delays at the IRS, we are unable to begin processing paper-filed returns until late March. When your return is processed, we will automatically adjust your credit if your return was impacted by this error. We anticipate that refunds will begin being issued for paper-filed returns in mid-April. Learn more about the delay with paper-filed returns.
We encourage eligible Oregonians to apply for all allowable tax credits. However, we recommend that taxpayers who plan to claim one or more of these new deductions and the Oregon Kids Credit and have not yet filed their returns, wait until their software product has been updated to file.
If you fill out your own tax forms, there is no need to wait to file, just make sure you are using the updated instructions for determining Oregon Kids' Credit eligibility.
The department has created a dedicated phone line to respond to questions about the Oregon Kids Credit: 503-947-0350. You can also send an email to questions.dor@dor.oregon.gov.
No, only the Oregon Kids Credit is affected.
The Oregon Kids Credit is a refundable credit for people with young dependent children. For 2025, if your adjusted gross income (AGI) after Oregon additions and subtractions and with excluded foreign earned income, total losses greater than $20,000, and deducted tip income, overtime wages, and passenger vehicle interest added back (your modified AGI) is $26,550 or less, the full credit is $1,050 per child for up to five dependent children ages 0 to 5 at the end of the tax year. Above a modified AGI of $26,550 the credit is reduced and is $0 at a modified AGI of $31,550.
More information about the credit is available on our Tax benefits for families webpage.