How does Oregon state income tax and unemployment insurance work in 2026?
Oregon runs graduated income tax to a top rate of 9.9%, adds a 0.1% statewide transit tax, and funds unemployment on a $56,700 wage base at a 2.4% new-employer rate.
· Oregon, United States guide
Illustration · Portland, Oregon
Oregon catches out-of-state employers in both directions. There is no sales tax, which reads well on a relocation slide. But the income tax is graduated and steep, reaching 9.9% on single income above $125,000, and there is no state-specific withholding form to hide behind. Compare the full picture with Washington's no-income-tax approach or California's parallel graduated structure before you decide where to hire.
The employer side stacks up fast. You withhold a 0.1% statewide transit tax on wages, fund Paid Leave Oregon at 1% of pay, and pay unemployment insurance on a $56,700 wage base at a 2.4% new-employer rate. Three separate state line items before you reach the federal stack.
What is the Oregon state income tax rate in 2026?
Oregon uses four graduated brackets for 2026: 4.75% on the first $4,050 of single income, 6.75% to $10,200, 8.75% to $125,000, and 9.9% above that.
On top of income tax, every employer withholds a 0.1% statewide transit tax on wages under the Oregon Department of Revenue payroll rules. Oregon take-home carries two state deductions, not one.
The graduated structure means the headline 9.9% only bites on income above $125,000. Hire someone in Portland on $90,000 and you withhold the top rate on a small top band with the lower rates covering the rest, so the effective Oregon rate lands well under 9.9%. The lower three thresholds index to inflation each year; the $125,000 top-bracket threshold is fixed in statute. Oregon's wage and overtime rules interact with these brackets for hourly workers paid at varying rates across pay periods.
The statewide transit tax is the line most payroll guides miss. It is 0.1% of wages, withheld from the employee, entirely separate from income tax and filed separately to the Oregon Department of Revenue statewide transit tax programme. The 2025 legislature passed a bill to double it for 2026, but voters rejected that at the May 2026 primary, so the rate holds at 0.1% for now.
How does Oregon income tax withholding work for employers?
Oregon uses Form OR-W-4 for state withholding and applies its own 9.9%-topping bracket table. The personal exemption is a $263 tax credit per exemption, not a deduction. Supplemental wages such as bonuses can be withheld at a flat 8%.
You file and remit Oregon withholding alongside the statewide transit tax through Frances Online, the combined payroll reporting system operated by the Oregon Department of Revenue.
Oregon decoupled its state W-4 from the federal form, so a new hire completes both. The federal W-4 drives federal withholding, and Form OR-W-4 drives the Oregon calculation against the graduated brackets and the $263 per-exemption credit. Skip the state form and you over-withhold or under-withhold against the wrong allowance count, which surfaces as a problem at your employee's tax filing. This is one of the registration steps Teamed handles as your employer of record from day one.
Employers report withholding and the 0.1% transit tax on the same combined payroll returns, filed quarterly through Frances Online. Deposit cadence follows your federal schedule. The 8% flat option for bonuses and commissions keeps off-cycle payments straightforward, rather than running each one through the full bracket formula. For termination pay, see Oregon's rules on final pay timing in the termination and at-will guide.
What is Oregon's unemployment insurance wage base and rate for 2026?
Oregon's UI taxable wage base is $56,700 per employee for 2026, up from $54,300 in 2025. New employers pay a UI rate of 2.4%, unchanged from last year.
The state holds Tax Schedule 3 for 2026. Experience-rated employers pay between 0.9% and 5.4%, set by their own claims history.
2026 UI taxable wage base: $56,700 per employee. New-employer rate: 2.4% on Tax Schedule 3. Experienced range 0.9% to 5.4%.
Source: Oregon Employment Department, current tax and contribution rates
Oregon's $56,700 wage base sits far above the $7,000 federal UI floor, because the state taxes a much larger slice of each salary. At the 2.4% new-employer rate, you pay up to $1,360.80 per employee per year until your experience rating kicks in. That is a meaningful early-hire cost that an employer cost calculator can pin precisely: use the Employer Cost Calculator to model it before you make the offer.
A new employer holds the 2.4% rate until it has built enough claims history to receive an experience rating, then moves into the 0.9% to 5.4% band set by the Oregon Employment Department. FUTA sits on top: 0.6% effective on the first $7,000 of wages after the state credit. If you're also looking at neighbouring states, compare with Idaho's UI structure, which runs a lower wage base.
What other payroll rules apply to Oregon employees?
You run the full federal stack: Social Security at 6.2% to $184,500, Medicare at 1.45%, and FUTA at 0.6% on $7,000. Then comes Paid Leave Oregon, a state programme funded by both sides.
Paid Leave Oregon costs 1% of wages up to $184,500, split 40% employer and 60% employee. Minimum wage is tiered by region.
Paid Leave Oregon is the line that catches employers. The total is 1% of pay: the employer share is 0.4% and the employee share is 0.6%, both capped at $184,500 of wages. Employers averaging fewer than 25 employees skip the employer share but still withhold and remit the employee 0.6%. The entitlements this funds, including family, medical, and safe leave, are covered in the Oregon paid family and sick leave guide. Federal FMLA runs alongside it for employers with 50 or more employees.
Minimum wage is the other Oregon layer: tiered by region and rising every 1 July. From July 2026 the standard rate is $15.55 an hour, the Portland metro rate inside the urban growth boundary is $16.80, and the nonurban-county rate is $14.55. The rate is set by where your employee physically works, so a remote hire near Portland and one in a rural county are not on the same floor. Full overtime and meal-break rules at each tier sit in the Oregon wage and overtime guide.
How Teamed runs Oregon payroll end to end
Teamed becomes your legal employer of record in Oregon for $599 per employee per month flat. Zero FX mark-up. Statutory employer cost passes through at cost, itemised on every invoice.
You hire the person. Teamed registers with the Oregon Department of Revenue and the Employment Department, withholds income tax and the transit tax, runs Paid Leave Oregon and unemployment insurance, and tracks the right regional minimum wage. Everything runs on one platform.
Real HR and legal experts handle your Oregon hires and know the graduated brackets, the 0.1% transit tax, the $56,700 UI wage base, and which minimum-wage tier each address falls into. An actual person, not a chatbot or a pooled queue. You see every cost: income tax, the transit tax, the Paid Leave Oregon employer share, UI contributions, and federal employer taxes pass through at cost, itemised and auditable on every invoice. No setup fee, no exit fee.
Contractor onboarding, EOR payroll, and entity graduation all live on one platform: an Oregon contractor who converts to W-2 keeps their record, and that same employee can graduate to your own US entity when the model no longer fits, without switching systems. Oregon's withholding and Paid Leave layers are heavier than a no-income-tax state, so the cost case for your own entity arrives sooner per headcount. Use the Crossover Calculator to see the month the model flips. EOR is the right model for Oregon, until it isn't. For a full comparison of how the US hiring picture shifts by state, start with the country overview.
The mistake we see on Oregon is budgeting for income tax and stopping there. The statewide transit tax, Paid Leave Oregon at one percent, and a wage base near sixty thousand dollars are all separate employer lines. And the minimum wage depends on the county the employee works in, not the one your office sits in. Map all four before you make the offer.
Oregon has no sales tax. That is the line every relocation deck leads with.
It hides a 9.9% top income tax, a 0.1% transit tax, Paid Leave at 1%, and a minimum wage that changes by county.
No sales tax was never the whole bill. The state lines behind it are, and running them right is the half you pay us for.
