Oregon allows taxpayers to deduct certain state or local income taxes paid to a state other than Oregon, subject to Oregon's itemized deduction rules and the applicable income and property tax limitation. If a taxpayer claims an Oregon credit for income taxes paid to another state on income that is also taxed by Oregon, the taxpayer must reduce the Oregon itemized deduction by the applicable amount of the other state's tax. This prevents the same tax from receiving both a credit and a deduction.
Key Rules for Taxes Paid to Another State
- Deduction: Taxpayers may generally deduct qualifying state or local income taxes paid to a state other than Oregon, as well as certain foreign income taxes, when itemizing deductions.
- Credit and deduction: If you claim an Oregon credit for income taxes paid to another state on mutually taxed income, you must reduce your Oregon deduction by the applicable amount of the other state's tax.
- Mutually taxed income: The Oregon credit generally applies only when the same income is taxed by Oregon and another state and the other state had a right to tax that income. The credit generally applies to income taxes and does not apply to city or county taxes, sales taxes, property taxes, or other taxes that are not based on income.
- Same-year credit: If you claimed a credit on an Oregon return for taxes you paid during the same tax year, you must reduce your Oregon deduction by the lesser of the other state's tax liability or the amount being deducted.
- Different-year payment: If you claimed an Oregon credit in a prior year and pay the related tax to the other state in a later year, you must reduce the later year's deduction by the lesser of the other state's tax for the year the credit was claimed or the amount of that tax paid in the later year.
- No double benefit: The portion of another state's income tax on which the Oregon credit is based cannot also be fully deducted as an Oregon itemized deduction. Any allowable deduction must be reduced as required by the Oregon instructions.
Taxes That Cannot Be Deducted (2025)
According to the 2025 Schedule OR-A Instructions, the following taxes and payments generally aren't deductible as Oregon itemized deductions:
- Oregon income tax
- Paid Leave Oregon contributions and benefits
- Charitable contributions claimed as payments of Oregon income tax
- Income taxes paid to another state on which an Oregon credit is claimed, subject to the required reduction
- Oregon statewide transit tax
- Federal income tax
- Sales tax
- Tax on real property paid to a foreign country
- Social Security, Medicare, unemployment, and railroad retirement taxes
- Gift tax
- Estate tax, other than qualifying federal estate tax on income in respect of a decedent
- Customs duties
- Gasoline tax
- License fees
- Assessments for property improvements
- Taxes paid for someone else
Deduction Limitation
For 2025, the total deduction for income and property taxes reported on Schedule OR-A lines 5 through 7 cannot exceed $40,000, or $20,000 for married taxpayers filing separately. This limitation applies to the combined amount of qualifying state and local income taxes, real estate taxes, and personal property taxes.
Source:
2025 Schedule OR-A Instructions – Oregon Department of Revenue
Disclaimer: Always verify details with the official forms and instructions from the Oregon Department of Revenue (DOR) or consult a tax professional for personalized advice.