Credits and breaks for Oregon families: the EIC at 14%, the Kids Credit, and child care

Oregon does not give families a bigger standard deduction, a dependent deduction or a child tax credit of general application. What it gives are four credits, three of them refundable, aimed mostly at households under about $60,000. The Oregon Earned Income Credit is 14% of the federal EITC for 2026, or 17% if any dependent was under 3 at year end, up from 9% and 12% on the 2025 return, and it reaches ITIN filers the federal credit excludes. The Oregon Kids Credit pays $1,050 for each child age 5 or younger, up to five children, to families with modified AGI of $26,550 or less, and nothing to families above $31,550 (2025 figures; 2026 to come). The Working Family Household and Dependent Care credit refunds a share of child care costs to households with AGI up to $61,320 for two people and $158,160 for eight (2024 limits (verify)). And the exemption credit, $256 for each person on the return, is nonrefundable and disappears entirely once AGI passes $100,000 single or $200,000 for other statuses. A family that qualifies for all four can see Oregon pay out several thousand dollars more than it withheld.

Each of these rides on the federal return. The EIC is a percentage of the federal EITC. The Kids Credit uses federal dependent rules and modified AGI. The care credit starts from the expenses and earned income on federal Form 2441. Get the federal return right and the Oregon credits follow; get the federal dependent claim wrong and all of them fall.

The Oregon Earned Income Credit

If you qualify for the federal earned income tax credit, Oregon adds 14% of it on line 37 of Form OR-40 for 2026. If a dependent on your return was under age 3 at the end of the year, the rate is 17%. A family with the maximum federal credit for two children, about $7,300 for 2026, gets about $1,022 from Oregon, or $1,241 with a toddler. The credit is refundable: it is paid whether or not you owe Oregon tax. Part-year residents and nonresidents multiply it by their Oregon percentage.

Oregon goes further than the federal credit in one respect. A worker who meets every federal EITC test except the Social Security number requirement, because they or a child file with an ITIN or hold an SSN not valid for work, may compute the federal credit as if they qualified and claim the Oregon percentage of it on Schedule OR-EIC-ITIN. The federal government pays nothing in that case; Oregon pays its share.

The jump from 9% to 14% came in SB 1507, passed in the 2026 session and effective June 5, 2026, for tax years 2026 and later. The credit was also scheduled to sunset in 2026 and was extended to 2032 by HB 2087 in 2025 (verify). The federal credit itself, with its income limits, investment-income test and rules for divorced parents, is in The earned income credit.

The Oregon Kids Credit

The Kids Credit, on line 38, is Oregon’s only child tax credit, and it is narrow by design. It pays $1,050 for each dependent child who was age 5 or younger at year end, for up to five children, a maximum of $5,250. The full amount goes to households with modified AGI of $26,550 or less; it phases down from there and reaches zero at $31,550. Those are the 2025 figures, indexed, and the 2026 amounts will appear in the 2026 Publication OR-17. The credit is refundable, ITIN filers may claim it, and married couples filing separately may not.

The phase-out is steep: $5,000 of income takes away the whole credit, which for a family with two small children is $2,100, a 42% marginal rate on that slice of income before the federal EITC phase-out and the Oregon EIC phase-out are counted. A parent choosing whether to pick up extra hours in December should know where the line is.

Child and dependent care: the WFHDC credit

The Working Family Household and Dependent Care credit refunds a percentage of what you paid for care of a child under 13, a disabled spouse or another disabled dependent so that you could work, look for work or attend school. It is claimed on Schedule OR-WFHDC and it is refundable. The percentage depends on three things: household size, AGI, and the age of your youngest qualifying person, with higher percentages for younger children and lower incomes. The Department publishes the percentage tables and an online calculator; the schedule does not print them.

The provider cannot be your spouse, the child’s other parent, or anyone you claim as a dependent, and you need the provider’s name, address and tax ID, the same as on federal Form 2441.

Two features make the WFHDC worth more than its federal cousin. It is refundable, where the federal child and dependent care credit is not, so a family that owes no Oregon tax still receives it. And the expense limits are far higher than the federal $3,000 and $6,000, so a household paying $1,500 a month for an infant’s care has all $18,000 in play. Keep the receipts and the provider’s information; the Department does ask. The federal credit is in The child and dependent care credit.

The exemption credit

Oregon has no dependent deduction. In its place, line 25 gives a credit of $256 for 2025 (2026 to come) for yourself, your spouse and each dependent, with an extra credit for a taxpayer or spouse with a severe disability and for a dependent child with a disability who qualifies for special education services. The credit is nonrefundable, so it is worth nothing to a family whose tax is already zero, and it has a cliff rather than a phase-out: no exemption credits at all when AGI is over $100,000 on a single or separate return or $200,000 on any other. A family of five with $199,000 of AGI claims $1,280; at $201,000 it claims nothing. The disability credits have their own $100,000 ceiling regardless of status.

529 accounts: a credit, not a deduction, and a trap for K-12

Contributions to the Oregon College Savings Plan (now called Embark) earn a refundable credit on Schedule OR-ASC, code 896, of up to $190 single or $380 joint for 2026, up from $180 and $360. The credit is a percentage of what you put in, and the percentage falls as AGI rises; the Department’s table runs from a high percentage for low incomes to a small one at the top, so a higher-income family must contribute considerably more to reach the $380 maximum. Oregon ABLE account contributions earn the same credit on the same terms. Only the Oregon plans count. The old 529 subtraction ended after 2019; anyone with unused carryforward from pre-2020 contributions may still be working it off.

The trap is K-12. Federal law lets a 529 pay up to $10,000 a year of elementary and secondary tuition tax-free. Oregon never adopted that provision. Earnings withdrawn for K-12 tuition are tax-free federally and taxable in Oregon, added back on Schedule OR-ASC, and a withdrawal the state treats as nonqualified can also trigger recapture of credits or subtractions claimed on the contributions. Use the 529 for college and a separate account for private school.

Head of household

Oregon uses your federal filing status. A head of household gets the joint rate brackets, 4.75% to about $9,100 and 6.75% to about $22,800 for 2026, but a standard deduction between single and joint, $4,560 for 2025 (verify), plus $1,200 at 65. The exemption-credit cliff for a head of household is the $200,000 line, not $100,000. The Kids Credit and the Oregon EIC both require that you not file separately, so a married parent who files separately for federal reasons loses both; the federal rules on who may file as head of household are in Head of household.

What families do not get

Oregon has no K-12 tuition credit or deduction, no credit for private school or homeschool expenses, no deduction for student loan interest beyond what flows through federal AGI, and no state credit matching the federal American Opportunity or Lifetime Learning credits. The federal tips and overtime deductions do reach Oregon, as subtractions on Schedule OR-ASC, which matters to many working parents; see How Oregon income tax works. The federal child tax credit does not reduce Oregon tax directly, but it reduces federal tax liability, and that shrinks the federal tax subtraction on line 10. A family whose $4,400 of child tax credits wipes out their federal tax gets no federal tax subtraction at all. That is the hidden cost of the credit design: the family with children pays slightly more Oregon tax than a childless couple with the same income and the same deductions, before the Oregon credits are counted.

How the credits are paid

Refundable credits go on lines 37 through 39 and are added to withholding and estimated payments, so they come back as part of the refund, by direct deposit if you give the account. Oregon holds early-season refunds on returns claiming refundable credits for fraud review and typically begins releasing them in mid-February (verify). A return with an EIC, Kids Credit or WFHDC claim filed in late January will not pay faster than one filed in mid-February. If the Department questions a dependent, it asks for the same proof the IRS does: school or medical records showing the child’s address, and birth certificates.