Mostly taxed
How Oregon taxes retirement income
Oregon does not tax Social Security, but it taxes almost everything else, and its rates are among the highest in the country. PERS pensions, company pensions and withdrawals from 401(k), 403(b), 457(b) and IRA accounts are all taxed at rates from 4.75% to 9.9%.
Federal retirees get a partial break: the share of a federal pension earned for service before October 1, 1991 can be subtracted. Oregon also offers a retirement income credit for people 62 and older with modest incomes, but it phases out quickly and most retirees with a full public pension will not qualify.
Oregon has no sales tax, which offsets part of the income tax burden. Many Oregon public retirees move to Washington or Nevada, which have no income tax, though their PERS pension remains taxed by Oregon only while they live there.
Questions
Does Oregon tax PERS pensions?
Yes. PERS pensions are taxed at Oregon’s regular rates of 4.75% to 9.9%.
Does Oregon tax Social Security?
No. Social Security is fully exempt.
If I move out of Oregon, is my PERS pension still taxed there?
No. Federal law stops states from taxing the pension income of people who no longer live there.