As Oregon (and the Willamette Valley in particular) is a popular place for retirees, the question often comes up regarding how the state taxes Social Security benefits. In short, Oregon doesn’t tax Social Security benefits, but the state does have tax rates that are high and could affect your bottom line.
Tax rates range from 5-9% depending on your income bracket. Incomes of $3,500 or less are taxed the lowest while those earning about $125,000 will be taxed at 9.9% – the highest rate.
Potential Option for Those Living Mostly on Social Security Income
If you were age 62 or older as of Dec. 31, 2015, were receiving retirement income and your household income is less than $22,500 as an individual ($45,000 for joint filers), you could take off additional thousands of dollars of federal income taxes paid on your state return. It’s called the Oregon Retirement Income Credit and is meant to help supplement low-earning retirees..
Oregon’s Exemption Credit for Severe Disability
If your federal adjusted gross income (AGI) isn’t more than $100,000, you or your spouse may be able to claim an additional exemption for a severe disability. (It’s likely that those that qualify for Social Security Disability Income may have a disability severe enough to qualify for this.) The state outlines a few different parameters for the severity of your disability and the exemption amount is equal to the standard state income tax exemption (varies based on total income amount).
Additional Retirement Tax Considerations
Oregon does tax income from retirement accounts like an IRA or 401(k) at full state income tax rates. If you’re collecting income from a private or public pension, those earnings are also partially taxed.
Although Oregon is considered a moderately friendly tax state for retirees, the process of application and approval for Social Security benefits can be anything but. Those in the Eugene and Albany area trust Drew L. Johnson, P.C., Attorneys at Law with their Social Security Claims backed up by a track record of success. Call (541) 434-6466 to schedule a free consultation.