What Oregon does and does not tax
| Income | Federal | Oregon | Washington |
|---|---|---|---|
| Social Security | Up to 85% taxable depending on income | Not taxed | Not taxed |
| Traditional IRA / 401(k) distributions | Ordinary income | Ordinary income | Not taxed |
| Roth distributions (qualified) | Not taxed | Not taxed | Not taxed |
| Pension income | Ordinary income | Ordinary income | Not taxed |
| Capital gains | Preferential rates | Ordinary income rates | Capital gains excise tax may apply to large long-term gains |
| Interest and dividends | Ordinary or qualified | Ordinary income | Not taxed |
Required minimum distributions and the threshold problem
RMDs are ordinary income and they arrive whether you need them or not. For a household in the Metro district, an RMD stacked on pension income can cross the Metro SHS threshold for the first time — with nothing withheld against it. Withholding can be elected on the distribution itself, which handles it without quarterly estimates.
The move-across-the-river question
Moving from Oregon to Washington in retirement removes Oregon income tax on distributions, pensions and investment income going forward. It is a genuine and substantial saving. It also has to be a genuine move: residency is a factual determination, and a state losing a large amount of tax will look at the facts. See moving between Oregon and Washington.
- Income received while an Oregon resident is Oregon taxable, regardless of where you live later
- A large one-off event — a business sale, a Roth conversion, a concentrated stock sale — is where timing matters most
- Washington’s capital gains tax can apply to very large securities sales, so run both numbers rather than assuming
- Oregon real property remains Oregon-source income even after you leave
Roth conversions
A conversion is taxable in the year it happens, at your rates that year, in the state you live in that year. That makes it one of the most timing-sensitive decisions in retirement — and for a household contemplating a move across the river, potentially a decision worth deferring by a calendar year.
Does Oregon tax Social Security?
No. Social Security benefits are not taxed by Oregon, though they may be partially taxable federally depending on your other income.
Is Oregon a bad state to retire in?
It taxes retirement income where Washington does not, which is a real cost. Whether that outweighs everything else about where you want to live is not a tax question.
Should I do a Roth conversion before moving?
Generally the opposite — a conversion after establishing Washington residency avoids Oregon tax on the converted amount. The residency has to be genuine and established first.
Do the Portland local taxes apply to retirement income?
They apply to income as defined for those taxes, which reaches many retirement income streams. Confirm your specific situation rather than assuming an exclusion.
Questions this guide does not answer
Guides are general. Your return is not. An appointment costs less than a wrong assumption.
Written by
Enrolled Agent, Oregon Licensed Tax Consultant
License number: Enrolled Agent 00160070-EA · Oregon Licensed Tax Consultant 35746-C
Heather has spent more than a decade preparing individual and business returns across the Portland metro and the Columbia Gorge, and holds unlimited rights to represent taxpayers before the IRS.
Last reviewed
This page is general information about Oregon, Washington and federal tax rules, not advice about your own return. Thresholds and rates change every year. Figures were verified as of August 2026 — check the linked official sources, or talk to us about your situation.