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Oregon Taxes: What You Need to Know

Federal, State, and Local Tax Withholding in Oregon in 2026

Residents of Oregon encounter a multi-layered tax system comprising federal, state, and local tax withholdings. For HR professionals and employees, understanding what’s new in 2026 is especially important as this year brings updated federal brackets under the One Big Beautiful Bill Act (OBBBA), a higher Social Security wage base, and several Oregon-specific payroll obligations that affect every paycheck.

Federal Tax Withholding

Oregon follows the federal progressive income tax system, meaning tax rates rise as income rises. For 2026, the OBBBA permanently extended the seven-bracket structure originally established under the Tax Cuts and Jobs Act of 2017. The IRS also applied an inflation adjustment of approximately 2.7%, meaning the income thresholds for each bracket are slightly wider than in 2025, a practical benefit for employees whose pay increases roughly keep pace with inflation.

Why it matters for HR: Employees who received modest pay raises in 2026 are less likely to experience “bracket creep” the situation where inflation alone, rather than real income growth, pushes a worker into a higher bracket. Still, HR teams should encourage employees to review and update their federal Form W-4 to reflect any changes in filing status, dependents, or additional income.

The federal income tax brackets for single filers in 2026 are as follows:

(Source: IRS, Revenue Procedure 2025-32 / IRS.gov)

Standard Deduction Update: The standard deduction for single filers rose to $16,100 in 2026 (up from $15,750 in 2025), and for married couples filing jointly it is now $32,200 (up from $31,500). These apply to returns filed in spring 2027.

(Source: IRS.gov)

State Tax Withholding

In Oregon, the state income tax is also progressive. Oregon’s brackets and the standard deduction amounts used in payroll withholding are adjusted annually based on the Consumer Price Index, a practice in place since 1993.

Oregon State Income Tax Brackets for 2026 (Single Filers):

(Sourc: https://sos.oregon.gov/blue-book/Pages/facts/finance-taxes.aspx )

For payroll withholding purposes, the Oregon Department of Revenue’s 2026 Withholding Tax Tables set the Oregon standard deduction amounts that employers use when running payroll:

• Single or Married Filing Separately: $2,910
• Head of Household: $4,685
• Married Filing Jointly / Qualifying Surviving Spouse: $5,820

(Source: Oregon DOR, 2026 Combined Payroll Tax Report Instructions, oregon.gov/dor)

Practical Note for HR: Oregon uses Form OR-W-4, not the federal W-4 for state withholding purposes. Oregon no longer has a personal exemption credit; instead, the OR-W-4 works through a worksheet that accounts for filing status and number of dependents. Employees who have not filed an Oregon-specific OR-W-4 since 2019 may be under- or over-withheld. HR teams should prompt new hires and encourage existing staff who have had life changes to complete a fresh OR-W-4.

(Source: Oregon DOR Withholding Tax Tables, oregon.gov/dor)

No Sales Tax: A significant aspect of Oregon’s tax structure is the absence of a state sales tax, this has not changed in 2026 and differentiates Oregon from the majority of U.S. states.

(Source: Oregon Secretary of State Blue Book, sos.oregon.gov)

Local Tax Withholding

Oregon does not have general local income taxes, which simplifies the withholding process for most employers. However, several specific local and regional payroll obligations apply:

Statewide Transit Tax (STT): The Oregon Legislature passed legislation in a 2025 special session to increase the Statewide Transit Tax rate from 0.1% (0.001) to 0.2% (0.002) beginning January 1, 2026. However, as of the current date, the rate increase has been referred to Oregon voters following the Secretary of State’s certification of Initiative Petition 302 on December 30, 2025. The current STT rate of 0.1% (0.001) remains in effect pending election results. Employers should monitor updates from the Oregon Department of Revenue.

The Statewide Transit Tax is withheld from employee wages — including wages earned by Oregon residents working out of state.

(Source: Oregon DOR, Statewide Transit Tax, oregon.gov/dor)

TriMet and Lane Transit District (LTD) Taxes: These are employer-paid payroll taxes — not employee withholdings. For 2026:

• TriMet Transit District tax rate: 0.8237% (0.008237)
• Lane Transit District tax rate: 0.80% (0.0080)

These apply to employers operating within the respective transit districts based on payroll amounts.

(Source: Oregon DOR, 2026 Combined Payroll Tax Report Instructions, oregon.gov/dor)

FICA & State Insurance Taxes in Oregon in 2026

Social Security Tax: The Social Security tax rate remains 6.2% for employees and 6.2% for employers. The significant 2026 update is the wage base: the Social Security taxable wage limit increased from $176,100 in 2025 to $184,500 in 2026. This means employees earning above that amount will stop having Social Security tax withheld once they hit the cap, but all wages with no ceiling remain subject to Medicare tax.

Why it matters: An employee earning $200,000 will have Social Security taxes withheld on the first $184,500 of earnings, resulting in $11,439 in employee-side Social Security tax for the year. HR payroll systems must be configured to stop Social Security withholding at the new $184,500 threshold.

(Source: IRS, Topic No. 751, irs.gov; IRS Publication 15 (Circular E), 2026, irs.gov)

Medicare Tax: The Medicare tax rate remains 1.45% for employees and 1.45% for employers, with no wage base ceiling. The Additional Medicare Tax of 0.9% applies to individual wages exceeding $200,000 (for single filers) and employers are required to begin withholding the additional 0.9% in the pay period when an employee’s year-to-date wages exceed $200,000.

(Source: IRS, Topic No. 751, irs.gov)

Oregon Paid Leave Oregon: For 2026, the Paid Leave Oregon contribution rate is 1% of gross wages, unchanged from 2025. However, the taxable wage base increased from $176,100 in 2025 to $184,500 in 2026 matching the Social Security wage base.

How the 1% splits:

• Employees pay 60% of the 1% rate (i.e., 0.6% of wages)
• Large employers (25+ employees) pay 40% of the 1% rate (i.e., 0.4% of wages)
• Small employers (fewer than 25 employees) do not owe the employer portion but must still withhold and remit employee contributions

Practical example: If an employer has $1 million in total payroll, the employer pays $4,000 (40% of 1%) and employees pay $6,000 (60% of 1%) annually.

(Source: Paid Leave Oregon, paidleave.oregon.gov; Oregon Employment Department, oregon.gov/employ)

Oregon Unemployment Insurance (UI): Oregon remains on Tax Schedule 3 for Unemployment Insurance in 2026, unchanged from 2025. The UI taxable wage base for 2026 is $56,700 per employee (up from $54,300 in 2025). UI rates vary by employer experience rating.

(Source: Oregon Employment Department, oregon.gov/employ)

Pre-Tax Deductions (Medical Insurance, 401(k), HSA, FSA) in Oregon in 2026

Oregon residents benefit from the same federally approved pre-tax deductions as employees nationwide. These deductions reduce the amount of income subject to both federal and Oregon state income tax, making them a practical tool for reducing take-home tax burden.

Health Insurance Premiums: Employee contributions to employer-sponsored medical, dental, and vision insurance are deducted from gross wages before federal and Oregon income taxes are calculated. This benefit has no annual IRS cap and remains unchanged in 2026.

401(k) Contributions: The IRS increased the 401(k) elective deferral limit to $24,500 for 2026 (up from $23,500 in 2025). For employees aged 50 or older, the standard catch-up contribution limit is $8,000, bringing the total potential contribution to $32,500. Under changes from SECURE 2.0, employees aged 60, 61, 62, or 63 are eligible for an enhanced catch-up contribution limit of $11,250, for a potential total of $35,750.

These contributions are made pre-tax, reducing both federal and Oregon taxable income until funds are withdrawn in retirement.

(Source: IRS, IR-2025-111, irs.gov; IRS Retirement Topics – 401(k), irs.gov)

IRA Contributions: The annual IRA contribution limit increased to $7,500 for 2026 (up from $7,000 in 2025). The catch-up contribution for those 50 and older is $1,100, for a total potential contribution of $8,600.

(Source: IRS, IR-2025-111, irs.gov)

Health Savings Accounts (HSAs): For employees enrolled in a High-Deductible Health Plan (HDHP), HSA contributions remain one of the most tax-advantaged options available. The 2026 limits are:

• Self-only coverage: $4,400 (up from $4,300 in 2025)
• Family coverage: $8,750 (up from $8,550 in 2025)

Contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Notably, the OBBBA expanded HSA eligibility beginning January 1, 2026, bronze and catastrophic Exchange plans are now treated as HSA-compatible HDHPs, opening HSA access to a larger group of Oregon employees.

(Source: IRS Publication 969, irs.gov; IRS Notice 2026-05, irs.gov)

Flexible Spending Accounts (FSAs): The FSA contribution limit for 2026 is $3,400 (up $100 from $3,300 in 2025). For plans that allow carryover of unused funds, the maximum carryover amount is $680 (up from $660). FSAs remain subject to the “use-it-or-lose-it” rule outside of employer-approved grace periods or carryover provisions.

(Source: IRS, Revenue Procedure 2025-32 / IRS.gov)

2026 Oregon & Federal Tax Summary Table

Oregon Tax Brackets 2026

Oregon’s tax system is progressive, meaning higher-income earners contribute a larger share. The top rate of 9.9% has remained unchanged since Ballot Measure 66 was approved by Oregon voters in 2010. Since 1993, income tax brackets have been indexed to the Consumer Price Index, so thresholds shift slightly each year.

Oregon Income Tax Brackets — Single Filers (2026):

(Source: Oregon Secretary of State Blue Book, sos.oregon.gov; Oregon DOR, oregon.gov/dor)

Oregon Income Tax Brackets — Married Filing Jointly (2026):

Key Points:

• Progressive Taxation: Oregon’s tax rates increase with income, ensuring that higher earners contribute proportionally more.
• No Sales Tax: Oregon does not impose a state sales tax, which can be a practical advantage for employees’ overall cost of living. Oregon law also does not allow taxpayers to reduce their Oregon taxes based on sales tax paid in another state.
• Oregon uses Federal AGI as its starting point: Because Oregon taxable income is based on federal adjusted gross income (AGI), any federal tax changes that increase federal AGI, such as deduction changes under the OBBBA will also raise Oregon taxable income. HR professionals should communicate this to employees who are planning estimated tax payments.

(Source: Oregon DOR, Publication OR-17, oregon.gov/dor; Oregon Secretary of State Blue Book, sos.oregon.gov)

Note: Tax laws are subject to change. This blog reflects information available as of April 2026. For Oregon payroll withholding forms, visit oregon.gov/dor. For federal tax guidance, visit irs.gov.