Oregon Retirement Income Tax: Social Security Is Not Taxed

The Oregon retirement income tax never touches your Social Security, but it taxes most other retirement income at rates that climb to 9.9 percent.1 That's the honest picture: friendly on Social Security, demanding on the rest. Pensions, IRA withdrawals, and 401(k) distributions are taxed at Oregon's regular graduated rates, which start at 4.75 percent.

Two narrow reliefs soften that. The Retirement Income Credit is still available for 2026, and Oregon law doesn't close it until tax years beginning on or after January 1, 2032. It's small and tightly income-tested. Separately, federal pension income for service performed entirely before October 1, 1991 may be subtracted in full.1

In This Guide

• Oregon Retirement Income Tax at a Glance
• Is Social Security Taxed in Oregon?
• How Oregon Taxes Pensions, IRAs, and 401(k)s
• Federal and Military Pensions: What You Can Subtract
• Do You Qualify for the Retirement Income Credit?
• Worked Example: Oregon Retirement Income Tax on an IRA Draw
• Frequently Asked Questions
• Next Steps

Oregon Retirement Income Tax at a Glance

Social Security is fully out. Almost everything else is taxed at the regular graduated rates, softened only by a federal pension subtraction and a narrow, income-tested senior credit.

The figures in this guide come from the Oregon Department of Revenue's Publication OR-17 and Oregon's income tax statutes.

Is Social Security Taxed in Oregon?

No. Oregon doesn't tax Social Security or Tier 1 Railroad Retirement benefits. Oregon law subtracts them from federal taxable income, so the Social Security your federal return taxes comes back out on your Oregon return.1

Railroad retirees get more than the Tier 1 break. Oregon's Publication OR-17 states that the subtraction has been extended by administrative rule to the other supplemental Railroad Retirement Board benefits, including Tier 2. That does not cover retirement benefits paid by private railroad employers, which have no Oregon subtraction.1

How Oregon Taxes Pensions, IRAs, and 401(k)s

Here is where Oregon's high rates bite. Pensions, IRA withdrawals, and 401(k) distributions are taxable at Oregon's regular graduated rates.1

The schedule runs from 4.75 percent on the lowest bracket to 9.9 percent at the top, which starts above $125,000 for single filers and above $250,000 for joint filers. The table shows every filing status as OR-17 lists it for tax year 2025.1

Before those rates apply, the standard deduction comes off. For tax year 2025, OR-17 lists it as $2,835 for single filers, $5,670 for married filing jointly or a qualifying surviving spouse, $4,560 for head of household, and $2,835 for married filing separately ($0 if your spouse itemizes). If you or your spouse turned 65 on or before January 1, 2026, or are blind, you add $1,200 (single or head of household) or $1,000 (married or qualifying surviving spouse) for each age or blindness box checked.1

If you are weighing how much to draw from these accounts to cover care, retirement accounts for care walks through the tradeoffs.

Federal and Military Pensions: What You Can Subtract

Where federal service was performed entirely before October 1, 1991, that pension income may be subtracted in full. That covers benefits paid to the retiree or a beneficiary, but not disability payments to someone who hasn't reached minimum retirement age.1 The subtraction is for federal pension income. Private pensions, IRAs, and 401(k)s are taxed at the graduated rates.

If your service, or the retirement points you earned, fall on both sides of October 1, 1991, Publication OR-17 has you subtract a percentage of the taxable federal pension income on your federal return. Divide the months of service (or points) before October 1, 1991 by your total months of service (or points). Once set, the percentage stays the same each year. OR-17's worksheet example runs the math for a retired U.S. Army Reserves member using retirement points. Full-year residents enter the subtraction on Schedule OR-ASC.1

This guide doesn't cover service performed entirely after October 1, 1991. Don't assume that pension is fully taxable, or fully subtractable, on the strength of this page.

Military retirement pay counts as a federal pension. OR-17 lists federal pensions as including military, and its worksheet example above is a retired reservist.1 Work your figures in Publication OR-17, or ask the Oregon Department of Revenue, with your service dates or retirement points in hand.

Do You Qualify for the Retirement Income Credit?

Oregon's Retirement Income Credit is a modest, income-tested credit for taxpayers who attained age 62 before the close of the tax year and are receiving pension income. It's still on the books for 2026: Oregon law provides that the credit may not be claimed for tax years beginning on or after January 1, 2032.1

The credit equals the lesser of your Oregon tax liability or 9 percent of net pension income.1 Oregon's Publication OR-17 lists three income tests. You must meet all three.1

Social Security counts against two of those tests even though Oregon doesn't tax it. A single retiree with $7,500 or more in Social Security fails the second test and misses the credit, whatever the pension.1

Household income is broader than taxable income. It's the combined income of you and a spouse living in the household, taxable and nontaxable, including veteran's and military benefits, but not Social Security or Tier 1 Railroad Retirement benefits. Oregon law also adds items such as inheritances, gifts and grants over $500 a year, and life insurance proceeds. If you get VA benefits, count them before you test yourself against the $22,500 or $45,000 limit.1

Net pension income, the base for the 9 percent, is capped. For a single filer it's the smaller of your pension income or $7,500 minus your Social Security and minus any household income over $15,000. For a joint return, the figures are $15,000 and $30,000. Federal pensions, including military, that you didn't subtract count as pension income for the credit. Full-year residents file Form OR-40 and claim it by entering Credit code 811 and the amount on Schedule OR-ASC (OR-17 also names Schedule OR-ASC-NP).1

Confirm the current year's figures in Publication OR-17 or with the Oregon Department of Revenue before you count on the credit.

Worked Example: Oregon Retirement Income Tax on an IRA Draw

Picture a single retiree, age 65, with $24,000 in Social Security and $50,000 drawn from a traditional IRA in 2026. The Social Security is exempt. The $50,000 IRA draw is taxable at Oregon's graduated rates, which start at 4.75 percent.1

The 9.9 percent top rate applies to income over $125,000 for a single filer, so this draw stays below it. Using OR-17's tax year 2025 figures as a stand-in, the $2,835 standard deduction plus the $1,200 age add-on comes off first, and most of what's left lands in the 8.75 percent bracket. There's no senior credit to offset the tax: $24,000 in Social Security is over the Retirement Income Credit's $7,500 limit on its own.1

These figures are hypothetical. They ignore other deductions and don't predict your own outcome.

This is general information rather than personalized tax advice. How the federal pension subtraction applies to your service dates, and whether you clear the Retirement Income Credit's income tests, are details to confirm with the Oregon Department of Revenue or a tax professional before you plan withdrawals. If retirement savings are part of how you will fund care, building a senior care funding plan is a useful next step.

Next Steps

If you are retired in Oregon, plan around a simple rule: Social Security is safe, and most other retirement income isn't.

• Count on the Social Security exemption. Oregon does not tax Social Security or Tier 1 Railroad Retirement benefits.1
• Expect graduated rates up to 9.9 percent on pension, IRA, and 401(k) income.1
• Check the Retirement Income Credit. It's still claimable for 2026 if you reached age 62 by year end, receive pension income, and pass all three income tests in the table above.1 Check the tests against the current Publication OR-17 before you file.
• Federal and military retirees: check your service dates. Federal pension income for service performed entirely before October 1, 1991 may be subtracted in full.1 Mixed service earns a pro-rated share.1
• Call with questions. OR-17 lists the Oregon Department of Revenue at 503-378-4988 or 800-356-4222, and questions.dor@dor.oregon.gov.1

If you are mapping out how to pay for care, how to pay for senior care covers the main routes.

Learn More

Find personalized help making sense of the Oregon retirement income tax at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.