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Oregon Taxes: What You Need to Know

Federal, State, and Local Tax Withholding in Oregon in 2024

Residents of Oregon encounter a multi-layered tax system comprising federal, state, and local tax withholdings.

Federal Tax Withholding: Oregon follows the federal progressive income tax system, which means that the tax rate increases as income rises. For 2024, federal income tax rates range from 10% for the lowest income bracket to 37% for the highest earners. This structure is designed to ensure that individuals contribute a fair share based on their income levels. The federal tax brackets for single filers in 2024 are as follows:

• 10% on income up to $11,000
• 12% on income from $11,001 to $44,725
• 22% on income from $44,726 to $95,375
• 24% on income from $95,376 to $182,100
• 32% on income from $182,101 to $231,250
• 35% on income from $231,251 to $578,125
• 37% on income over $578,125

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State Tax Withholding: In Oregon, the state income tax is also progressive, with rates ranging from 4.75% to 9.9%. The brackets for 2024 are structured to increase the tax burden progressively based on income:

• 4.75% on income up to $4,300
• 6.75% on income from $4,300 to $10,750
• 8.75% on income from $10,750 to $125,000
• 9.9% on income over $125,000

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A significant aspect of Oregon’s tax system is the absence of a state sales tax, which differentiates it from many other states and is beneficial for consumers. This lack of sales tax means that residents do not face additional taxation on purchases, thereby potentially reducing the overall cost of living in the state .

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Local Tax Withholding: 

Oregon does not have local income taxes, which simplifies the tax withholding process for residents. However, certain localities do impose specific types of additional taxes. For instance, Oregon residents may face transit taxes such as the TriMet Transit Tax in the Portland area or the Lane Transit District (LTD) tax. There are also local taxes like the Metro Supportive Housing Services Tax and the Preschool For All Personal Income Tax for residents of Multnomah County. These taxes generally affect specific income thresholds or types of income, but they are not classified as local income taxes like those found in other states

FICA & State Insurance Taxes in Oregon in 2024

In 2024, residents of Oregon are required to pay Federal Insurance Contributions Act (FICA) taxes, which are crucial for funding Social Security and Medicare programs. Here’s a breakdown of the contributions:

1. Social Security Tax:
   The Social Security tax rate for employees is 6.2% on wages earned up to $168,600. This wage base limit is adjusted annually based on national wage growth, and it caps the amount of income that is subject to the Social Security tax. Earnings above this threshold are not taxed for Social Security, meaning higher earners do not pay this tax on income exceeding $168,600.
2. Medicare Tax:
   The Medicare tax is assessed at a rate of 1.45% on all wages, with no income cap. Additionally, there is an extra 0.9% tax on earnings that exceed $200,000 for single filers (or $250,000 for married couples filing jointly). This additional Medicare tax is intended to help fund the increasing costs of Medicare as the population ages and medical expenses rise.
3. Employer Contributions:
   Employers are required to match the contributions made by employees for both Social Security and Medicare. This means that employers also pay 6.2% for Social Security and 1.45% for Medicare on each employee’s wages. Therefore, the total contribution to Social Security and Medicare (combined employee and employer) can be significant, totaling 12.4% for Social Security and 2.9% for Medicare.

These FICA taxes play a vital role in funding federal programs that provide financial support and health care to eligible individuals, especially retirees and those with disabilities. The consistent contribution to these programs is crucial for ensuring their sustainability for future generations.

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Pre-Tax Deductions (Medical Insurance, 401K, etc.) in Oregon in 2024

Oregon residents benefit from a variety of pre-tax deductions that can significantly reduce their taxable income. These deductions not only help to lower the amount of income subject to taxation but also enhance savings for future expenses, particularly related to healthcare and retirement. Here are the key pre-tax deductions available to Oregon residents in 2024:

1. Health Insurance Premiums: Contributions made by employees towards employer-sponsored medical, dental, and vision insurance plans are deducted from their gross income before taxes. This reduces the taxable income and, consequently, the overall tax liability. The specifics can vary based on the employer’s plan offerings, but employees typically see a reduction in their paycheck for these premiums before taxes are calculated .
2. 401(k) Contributions: Employees in Oregon can contribute up to $23,000 to their 401(k) retirement accounts in 2024. Additionally, individuals aged 50 and older are eligible for a catch-up contribution of $7,500, bringing their total potential contribution to $30,500. These contributions are made pre-tax, allowing employees to defer taxes on their retirement savings until they withdraw funds during retirement .

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1. Health Savings Accounts (HSAs): For those enrolled in high-deductible health plans (HDHPs), contributions to HSAs can be made on a pre-tax basis. The contribution limits for 2024 are $4,150 for individual coverage and $8,300 for family coverage. HSAs offer tax advantages not only when contributions are made but also allow for tax-free withdrawals for qualified medical expenses .
2. Flexible Spending Accounts (FSAs): FSAs allow employees to set aside pre-tax dollars for qualified medical expenses. For 2024, the contribution limit for an FSA is $3,050. Unlike HSAs, FSAs typically have a “use-it-or-lose-it” policy, where funds not used by the end of the plan year may be forfeited, though some plans offer a grace period or allow a small amount to carry over .

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Overall, these pre-tax deductions provide substantial tax savings for Oregon residents, enabling them to allocate more funds toward healthcare, retirement, and other essential expenses while reducing their current tax burdens.

Reference: SmartAsset Oregon Paycheck Calculator

Median Household Income in Oregon

As of 2023, the median household income in Oregon was approximately $80,160, with projections for 2024 estimating an increase to around $74,000. This trend reflects Oregon’s diverse economy, including key sectors like technology and healthcare.

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Oregon Tax Brackets 2024

Oregon’s tax system is designed with a progressive structure, meaning that higher-income individuals pay a higher percentage of their income in taxes. This approach aims to create a more equitable distribution of the tax burden among residents. Below is an overview of the tax brackets for single filers in Oregon for 2024:

For married couples filing jointly, the tax brackets are adjusted to reflect higher income thresholds for each bracket. This ensures that couples can earn more before moving into a higher tax rate, thereby reducing the tax burden for families.

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Key Points:

• Progressive Taxation: Oregon employs a progressive tax system, which means that tax rates increase with income, thereby ensuring that those with higher earnings contribute a larger share.
• No Sales Tax: Notably, Oregon does not impose a state sales tax, which can be beneficial for consumers as they are not taxed on goods and services at the point of purchase.

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• Local Taxes: While Oregon has a state income tax, it does not have local income taxes, simplifying the tax landscape for residents.

This tax structure is intended to balance the needs of state revenue with the ability of residents to pay, creating a fairer tax system for all Oregonians.