Oregon Income Taxes Paid to Another State
Oregon does not impose a state income tax on income earned outside of Oregon. However, if you are a resident of Oregon and earn income in another state, you may be required to file a tax return in that state and may also need to file an Oregon return to claim a credit for taxes paid to the other state.
Key Points
- Nonresident Income: If you work in another state but live in Oregon, you must file a nonresident return in that state and may claim a credit on your Oregon return for taxes paid there.
- Claiming Credit: Oregon allows residents to claim a credit for income taxes paid to another state to avoid double taxation. This credit is applied on Form OR-40, line 20 (or equivalent on nonresident forms).
- Form OR-40: Use Form OR-40 (or Form OR-40-N for nonresidents) to report your Oregon income and claim credits. The credit is calculated based on the tax paid to the other state and your Oregon taxable income.
- Publication OR-17: This guide provides detailed instructions on how to claim credits for taxes paid to other states. It supplements the IRS Publication 17 and Oregon’s tax rules.
- Worksheet FCG: For farm liquidation long-term capital gains, use Worksheet FCG in Publication OR-FCG to compute the tax at a reduced rate. This is not directly related to taxes paid to another state but is referenced in Oregon tax forms.
How to Claim the Credit
- File your return in the other state where you earned income.
- Keep a copy of the tax return and payment receipt from that state.
- On your Oregon return (Form OR-40), use the credit section to claim the amount of tax paid to the other state.
- Ensure you do not exceed your Oregon tax liability with the credit.
Source:
Publication OR-17 Individual Income Tax Guide
Form OR-40
Form OR-40-N and Form OR-40-P Instructions
Disclaimer: Always verify with the official Federal or State Department of Revenue Forms and Instructions for the most accurate and up-to-date information.