Oregon 2026 Tax Changes — What Residents & Business Owners Must Know
On January 1, 2026, major federal tax changes take effect due to the expiration of several Tax Cuts and Jobs Act (TCJA) provisions and the updated rules under the One Big Beautiful Bill Act (OBBBA).
Oregon residents — who pay a progressive state income tax based on federal AGI — will feel the effects immediately. Higher federal taxable income automatically increases Oregon taxable income.
These Changes Affect:
- W-2 earners in Portland, Salem, Eugene, Gresham, Bend, Hillsboro
- Teachers, healthcare workers, and public-sector employees
- Contractors, freelancers, and small business owners
- Real estate investors and rental property owners
- STR hosts statewide
- Families with children
- Retirees drawing taxable income
- Dual-income households
Below is the full, Oregon-specific overview of the 2026 federal changes.
Key 2026 Federal Changes Affecting Oregon
Standard Deduction Shrinks
TCJA temporarily doubled the standard deduction. OBBBA did not extend this provision.
- Single: ~$8,300
- Married Filing Jointly: ~$16,600
- Head of Household: ~$12,400
Because Oregon uses federal AGI, this deduction drop increases both federal and Oregon taxable income.
Federal Income Tax Brackets Increase
- 12% → 15%
- 22% → 28%
- 24% → 31%
- dual-income households
- tech and healthcare professionals
- educators and state workers
- hospitality and service workers
- households earning $60K–$250K
These changes will significantly raise federal tax liability and increase Oregon state taxes as well.
QBI Deduction Made Permanent Under OBBBA
OBBBA permanently preserved the 20% Qualified Business Income (QBI) deduction.
- LLCs
- S-Corps
- sole proprietors
- contractors
- freelancers
- qualified rental operations
Beginning in 2026, updated QBI rules include new income thresholds and documentation requirements.
Child Tax Credit Shrinks
- The federal Child Tax Credit decreases from about $2,000
- To roughly $1,000 per child
- Refundability decreases
Families throughout the Portland metro area and Oregon’s growing suburbs will see smaller refunds.
Marriage Penalty Returns
In 2026, the marriage penalty reappears due to TCJA’s expiration.
- faster progression into higher federal brackets
- tighter credit phaseouts
- increased federal AGI
- higher Oregon state tax
Oregon–Specific Tax Considerations
1. Oregon Uses Federal AGI for State Tax Calculations
- lower federal deductions
- higher federal taxable income
- reduced federal credits
…all increase Oregon state taxes.
Residents across the state will see higher combined federal and state liabilities.
2. Real Estate Owners & Rental Investors Will Be Affected
Oregon real estate markets — including Portland, Bend, Eugene, Salem, and coastal areas — will feel federal changes involving:
- capital gains
- depreciation
- rental loss rules
- STR participation and documentation
- property sale timing
Property appreciation across much of Oregon increases capital gains exposure beginning in 2026.
3. STR Owners Must Prepare for Updated Rules
- Portland
- Bend
- Eugene
- Hood River
- Oregon Coast towns
- Sunriver
- reduced bonus depreciation
- stricter participation requirements
- enhanced safe harbor compliance
- limitations on losses
STR hosts will need stronger documentation.
4. Oregon’s High Cost of Living Magnifies Federal Changes
- high housing costs
- high rent
- high childcare expenses
- high transportation costs
Reduced deductions and higher brackets impact Oregon residents more severely than many other states.
5. Retirement Income Planning Is Essential
- IRA withdrawals
- 401(k) distributions
- pension income
Federal bracket increases mean retirees may owe significantly more in combined taxes.
Who Is Most Affected in Oregon (2026)
- Dual-income households
- Tech and healthcare professionals
- Contractors, freelancers, and small business owners
- Real estate investors and landlords
- STR operators
- Families with children
- Retirees with taxable income
- Middle-income earners
What Oregon Residents Should Do Before December 31, 2025
- Review federal and state withholding
- Maximize retirement contributions
- Consider Roth conversions
- Review LLC/S-Corp structure for QBI alignment
- Prepare STR and rental documentation
- Assess capital gains exposure
- Time property or investment sales strategically
- Build a multi-year tax strategy
Oregon 2026 Tax FAQ
Does Oregon conform to QBI?
No. QBI is federal-only.
Will Oregon taxes increase?
Rates remain the same, but Oregon taxable income rises due to federal changes.
Are families affected?
Yes. The reduced Child Tax Credit and higher AGI shrink refunds.
Are STR owners impacted?
Yes. Depreciation reductions and participation rules tighten.
Are retirees affected?
Yes. Higher federal brackets raise tax costs on IRA and pension withdrawals.
Get your 2026 Oregon Tax Strategy
Oregon residents face substantial tax changes in 2026.
Higher taxable income, reduced credits, and updated rules affecting business owners, renters, families, and retirees make early planning essential.