What’s new in Oregon for 2026: a bigger EIC, three federal breaks taken back, and no kicker

The 2026 Oregon return will differ from the 2025 return in five ways. The Oregon earned income credit rises from 9% to 14% of the federal credit, and from 12% to 17% for a family with a child under 3. The deduction for car-loan interest, which Oregon allowed in 2025, is added back. Federal bonus depreciation is disallowed and recovered over the asset’s life. The federal exclusion for qualified small business stock is added back. And the kicker line is empty: the 9.863% kicker belonged to the 2025 return, and there is none on 2026 returns. The tips and overtime deductions survive as Oregon subtractions. The federal $6,000 senior deduction never reached Oregon and still does not.

All of the legislative changes come from one bill, Senate Bill 1507, Oregon Laws 2026, chapter 142, effective June 5, 2026. A referendum to undo the parts that disconnect from federal law failed to gather enough signatures by the July 2, 2026 deadline, so the law stands as written. Nothing tax-related is on the November 3, 2026 ballot.

The federal law of 2025 and what Oregon kept

Oregon ties its definition of taxable income to the federal code on a rolling basis, so a new federal deduction normally flows into the Oregon return the moment Congress passes it, unless the Legislature says otherwise. For the 2025 federal law, the Legislature said otherwise three times and stayed quiet on the rest.

The 2025 Publication OR-17 lists IRC 151, including the age-65 deduction, among Oregon’s conformity exceptions. The three 2026 add-backs come from the SB 1507 staff measure summary and the Department of Revenue’s 2026 Summary of Legislation.

Tips and overtime stay. A server, a bartender, a nurse on time-and-a-half: whatever amount comes off the federal return as the qualified tips or qualified overtime deduction comes off the Oregon return as a subtraction on Schedule OR-ASC. The Legislature considered the question in SB 1507 and left both alone. Two cautions. First, the Oregon figure is the federal deduction amount, which for overtime is the premium half of time-and-a-half, not the whole overtime line on the pay stub; software that shows a smaller Oregon number than the W-2 overtime is right. Second, a nonresident who works some days in Oregon subtracts only tips and overtime earned on Oregon workdays, on Schedule OR-ASC-NP, not a prorated share.

The senior deduction does not. The federal $6,000 deduction for taxpayers 65 and older is written into IRC 151, and Oregon is disconnected from IRC 151, which is also why Oregon has an exemption credit instead of exemption deductions. The senior deduction therefore never reaches Oregon taxable income and there is nothing to add back; the Oregon return simply does not start from the line where it was taken. Oregon’s own age break is smaller: an additional standard deduction of $1,200 (single or head of household) or $1,000 per spouse (joint) for 2025, with the 2026 figure to come, plus the full subtraction of Social Security.

Senate Bill 1507: the three add-backs

Car-loan interest. The federal deduction for interest on a loan for a new, U.S.-assembled passenger vehicle runs from 2025 through 2028. Oregon allowed it on 2025 returns. For tax years beginning on or after January 1, 2026, SB 1507 requires the federal deduction to be added back on the Oregon return. A buyer who financed a qualifying car in 2025 keeps the federal deduction for all four years but gets the Oregon benefit for one.

Bonus depreciation. The federal law restored 100% bonus depreciation. For property placed in service in tax years 2026 and later, Oregon disallows the federal bonus under IRC 168(k). The taxpayer adds back the federal deduction in the year the property goes into service, then subtracts it over the asset’s remaining depreciable life, typically five or seven years. Over the life of the asset Oregon allows the same total deduction; it refuses to allow it all at once. Landlords, farmers and sole proprietors who bought equipment in 2026 will see this on Schedule OR-ASC. Section 179 expensing is a different code section and is not named in the bill (verify).

Qualified small business stock. Federal law lets a founder or early investor exclude gain on qualified small business stock held long enough, and the 2025 federal law expanded the exclusion. For sales in tax years 2026 and later, Oregon adds the excluded gain back and taxes it as ordinary income at up to 9.9%. A sale closed in 2025 was under the old rule.

The Oregon earned income credit, 14% and 17%

This is the change that reaches the most returns. The Oregon EIC is refundable and is a flat percentage of the federal earned income credit. For tax years 2026 and later it is 14% of the federal credit, or 17% if a dependent was under age 3 at the end of the year, up from 9% and 12%. A family at the federal maximum for two children, roughly $7,000, gets about $980 from Oregon, or about $1,190 with a child under 3; the same family got about $630 or $840 on the 2025 return. Part-year residents and nonresidents multiply by their Oregon percentage. Filers with an ITIN, and workers whose only federal disqualifier is a Social Security number not valid for work, claim the Oregon credit on Schedule OR-EIC-ITIN even though they get no federal credit. House Bill 2087 (2025) extended the credit’s sunset from January 1, 2026 to January 1, 2032.

The kicker: none this year

The kicker is Oregon’s surplus credit. When state revenue for a two-year budget comes in more than 2% above the forecast, the excess is returned on the following odd-year return as a percentage of the prior year’s tax. The 2025 return, filed in spring 2026, carried a kicker of 9.863% of 2024 Oregon tax liability. Kickers appear only on odd-year returns, so there is no kicker line on the 2026 return. Looking further out, the state economist’s August 26, 2026 forecast shows personal income tax revenue for 2025-27 at $32,450 million against a kicker threshold of $32,976 million, $526 million short, so as of this writing no kicker is projected for the 2027 return either. Forecasts move; the final answer comes after the biennium closes in mid-2027.

Someone who had 2024 Oregon tax but has not yet filed a 2025 return can still claim the 9.863% kicker by filing it.

Other changes for 2026

New-jobs credit. SB 1507 and House Bill 4084 create a nonrefundable credit of $1,000 per net new Oregon job paying at least 150% of minimum wage, up to 10 jobs per taxpayer, for tax years 2026 through 2031. The job count compares average employment in the 12 months ending June 30 against the prior year, and the Oregon Business Development Department must certify eligibility in writing. The program is capped at $12.5 million a year, and unused credit carries forward three years. This reaches sole proprietors and pass-through owners, not employees.

Pass-through entity elective tax extended. Senate Bill 1510 extends the PTE-E tax and its owner-level credit through tax year 2027. It is Oregon’s workaround for the federal SALT cap: the partnership or S corporation pays Oregon tax at the entity level, deducts it federally, and the owners take a credit on their Oregon returns.

Oregon 529 and ABLE credits. The refundable credit for contributions to an Oregon College Savings Plan or Oregon ABLE account rises to a maximum of $190, or $380 on a joint return, for 2026, from $180 and $360. The percentage of contributions allowed depends on AGI.

Referendum 120. On May 19, 2026, voters rejected, 83% to 17%, the tax and fee increases in the 2025 transportation package. The Statewide Transit Tax withheld from every Oregon paycheck stays at 0.1% rather than doubling to 0.2%, and the gas tax stays at 40 cents a gallon.

Portland, Metro and Multnomah County

Residents of the Metro district and Multnomah County file separate local returns with the Portland Revenue Division, and three things changed for 2026.

The Metro Supportive Housing Services tax, 1% of Oregon taxable income above a threshold, is indexed for inflation for the first time. The 2026 thresholds are $128,000 single and $205,000 joint, up from $125,000 and $200,000; the Revenue Division has already posted $132,000 and $211,000 for 2027. The Multnomah County Preschool for All tax stays at 1.5% above $125,000 single / $200,000 joint and 3% above $250,000 / $400,000; those thresholds are not indexed, and the scheduled 0.8-point increase has been pushed to 2028. For both taxes the estimated-payment trigger rises from $1,000 to $5,000 of liability for 2026 and later. Employers withhold automatically only for employees paid over $200,000; everyone else opts in or pays estimates.

The Portland Arts Tax changed shape for 2026. It is now $50 for a single, head of household, married filing separately or qualifying surviving spouse filer and $100 on a joint return, owed by Portland residents 18 and older with Oregon taxable income above $20,000 single / $40,000 joint, and it will be indexed from 2027. It replaces the old flat per-adult tax of $35 (verify prior amount), and the permanent low-income senior and disability exemptions are gone; anyone at or under the income threshold is exempt without filing. It is due April 15, 2027 with the rest.

What did not change

The rates: 4.75%, 6.75%, 8.75% and 9.9%, with the top rate still starting at $125,000 single / $250,000 joint, figures fixed in statute and never indexed. Social Security is still fully subtracted; pensions, IRAs and PERS are still fully taxed. The federal tax subtraction is still on the return, at $8,500 in the 2026 withholding tables, with the return figure to come (verify). The estate tax threshold is still $1,000,000: Senate Bill 1511, which would have raised it to $2.5 million, did not pass, and the repeal initiative missed the ballot. Oregon still has no sales tax.