Yes, Oregon does tax IRA distributions. Traditional IRA withdrawals that count as taxable income on your federal return flow straight into your Oregon return and are taxed as ordinary income at rates from 4.75% to 9.9%.{1Oregon State Legislature. Oregon Revised Statute Chapter 316 Personal Income Tax} Qualified Roth IRA distributions are tax-free at both the federal and state level. Oregon has no general retirement income exclusion, but it fully excludes Social Security benefits and offers a narrow credit for lower-income retirees age 62 and older.
How Oregon Calculates the Tax
Oregon’s income tax begins with the adjusted gross income figure from your federal Form 1040. Taxable IRA distributions are already baked into that number, so there is no separate Oregon step to add them in. The state then applies its own marginal rates to your taxable income after any state-specific adjustments.
For the 2025 tax year, single filers pay:
- 4.75% on the first $4,400 of taxable income
- 6.75% from $4,400 to $11,100
- 8.75% from $11,100 to $125,000
- 9.9% above $125,000
Joint filers reach those same rates at roughly double the thresholds: $8,800, $22,200, and $250,000.{2Oregon.gov. 2025 Oregon Tax Rate Charts} Bracket boundaries adjust annually for inflation; the rates themselves are fixed in statute. A single large withdrawal can push you from the 6.75% bracket into 8.75% or 9.9%, so the size and timing of distributions matter more in Oregon than in states with flatter structures.
If you made nondeductible contributions to a traditional IRA, part of your account is basis and comes back out tax-free. The IRS tracks this on Form 8606, and Oregon accepts the federal calculation.{3Internal Revenue Service. Instructions for Form 8606} You cannot pull only the tax-free portion, though. The pro-rata rule treats every withdrawal as a proportional mix of taxable and nontaxable money based on the ratio of your total basis to your total traditional IRA balance on December 31.
Required Minimum Distributions
Once you turn 73, the IRS requires annual withdrawals from your traditional IRA. That age rises to 75 starting in 2033 under the SECURE Act 2.0. Required minimum distributions are fully included in federal AGI and therefore fully taxable in Oregon.{4Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs} RMDs grow as the IRS life-expectancy divisor shrinks each year, so a retiree comfortably in the 6.75% bracket at 73 can end up in the 8.75% bracket later in retirement without changing anything about their spending.
Roth IRAs
Oregon follows federal rules on Roth accounts, so qualified Roth distributions are tax-free in the state. A distribution qualifies when the Roth has been open at least five tax years and you are at least 59½, disabled, or using up to $10,000 for a first-time home purchase.{5Internal Revenue Service. Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)}
Nonqualified Roth distributions split into two pieces. Contributions come out first, always tax-free, since you already paid tax on that money. Earnings come out after contributions are exhausted, and the earnings portion is taxable federally and in Oregon at ordinary rates.
Roth Conversions
Converting a traditional IRA to a Roth is treated as a taxable distribution for both federal and Oregon purposes. The full converted amount, minus any after-tax basis, is added to federal AGI and flows into Oregon taxable income.{6Oregon Secretary of State. Oregon Administrative Rule 150-316-0225} Converting during low-income years, after retirement but before RMDs begin, can fill up the 4.75% or 6.75% brackets rather than paying 8.75% or 9.9% on forced distributions later.
Inherited IRAs
Inherited traditional IRA distributions are taxable in Oregon the same way they would be for the original owner. The timing question is what determines the size of the yearly tax bill.
Most non-spouse beneficiaries who inherited after 2019 must empty the account by the end of the tenth year following the original owner’s death.{7Internal Revenue Service. Retirement Topics – Beneficiary} You choose how to spread withdrawals across those years. Bunching them into two or three tax years can push you into 8.75% or 9.9%; spreading them evenly tends to keep more of the money in lower brackets.
A narrower group of eligible designated beneficiaries can still stretch withdrawals over their own life expectancy. That group includes surviving spouses, minor children of the deceased owner, disabled or chronically ill individuals, and beneficiaries no more than 10 years younger than the original owner. Surviving spouses can also roll the inherited IRA into their own IRA, which usually produces the best tax outcome.
Early Withdrawal Penalty
Withdrawals before 59½ generally trigger a 10% additional federal tax on the taxable portion. Oregon does not impose its own early withdrawal penalty, but the distribution still increases your federal AGI, which still increases your Oregon tax.
The 10% federal penalty has several exceptions, including unreimbursed medical expenses above 7.5% of AGI, qualified higher education costs, up to $10,000 toward a first-time home purchase, health insurance premiums while unemployed, and total disability.{8Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions} SECURE 2.0 added distributions of up to $5,000 for the birth or adoption of a child and emergency personal expense distributions of up to $1,000 per year. Even when an exception removes the penalty, the distribution itself remains taxable federally and in Oregon.
What Reduces Your Oregon Tax
Social Security Subtraction
Oregon fully excludes Social Security benefits. Anything included in federal AGI as Social Security is subtracted on your Oregon return.{9Oregon.gov. Publication OR-PIT-VET, Personal Income Tax Items} A retiree with $25,000 in Social Security and $30,000 from a traditional IRA pays Oregon tax on the IRA money, not the combined $55,000.
Qualified Charitable Distributions
If you are at least 70½ and give to charity anyway, a qualified charitable distribution keeps IRA money out of AGI entirely. The transfer must go directly from your IRA custodian to a qualified charity; if the check passes through your hands, the tax benefit is lost. A QCD satisfies your RMD if one applies, and because Oregon starts from federal AGI, the excluded amount also disappears from your Oregon return. For 2026 the annual limit is $111,000 per person.{10Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs} SEP and SIMPLE IRAs do not qualify.
Retirement Income Credit
Oregon’s targeted relief for older retirees is a credit, not a subtraction. To claim it you must be at least 62. The credit equals 9% of the lesser of your qualifying retirement income or a base amount of $7,500 for single filers, and that base drops dollar-for-dollar once household income exceeds $15,000 (single) or $30,000 (joint).{11Cornell Law School. Oregon Admin Code 150-316-0225 – Retirement Income Credit} Household income plus Social Security cannot exceed $22,500 single or $45,000 joint, and Social Security benefits alone cannot exceed $7,500 single or $15,000 joint.{12Oregon State Legislature. 2025 Tax Credit Review – Certain Retirement Income} The maximum credit for a single filer with no Social Security income is $675, and the credit can never exceed your Oregon tax liability. It phases out quickly, so it mostly reaches retirees with modest incomes.
Withholding and Estimated Payments
Default federal withholding on IRA distributions is 10% of the gross amount, and you can raise or lower that rate on Form W-4R with your custodian.{13Internal Revenue Service. 2026 Form W-4R} The 10% default covers only federal tax. An Oregon retiree in the 8.75% state bracket plus the 22% federal bracket owes closer to 31% combined, so withholding at the default leaves a real gap.
Oregon does not offer a dedicated state withholding form for IRA distributions. You generally cover the state side through quarterly estimated payments to the Oregon Department of Revenue. The safe harbor mirrors the federal one: total payments must equal at least 90% of your current-year Oregon tax or 100% of the prior year, whichever is smaller, and no underpayment penalty applies if you owe less than $1,000 after withholding and credits.{14Oregon.gov. 2025 Form OR-10 Instructions} Estimated payments are due April 15, June 15, September 15, and January 15 of the following year. Oregon charges 8% annual interest on underpayments for 2026. A simpler alternative is to instruct your custodian to withhold enough federal tax to cover both liabilities and claim any refund later; the IRS allows federal withholding up to 100% of a distribution.
If You Move Out of Oregon
Federal law protects former residents. Under 4 U.S.C. § 114, no state may tax the retirement income of someone who is neither a resident nor a domiciliary of that state, and IRA distributions are specifically included in covered retirement income.{15Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income} If you leave Oregon entirely before the tax year begins, Oregon cannot tax your IRA withdrawals at all.
Domicile is the tripwire. Keeping an Oregon home, an Oregon driver’s license, or an Oregon voter registration can keep you an Oregon resident for tax purposes even if you spend most of the year elsewhere. If you moved partway through the year, you file as a part-year resident on Form OR-40-P and allocate IRA distributions to the portion of the year you were still an Oregon resident.