TL;DR: Oregon taxes income but not sales, while Washington does the reverse. These differences significantly impact where people live, work, and retire. Washington favors high earners and retirees with no income tax. Oregon benefits heavy spenders and offers more stable property tax structures.
Main points:
- Income Tax: Oregon taxes income up to 9.9%; Washington has none.
- Sales Tax: Oregon has no sales tax; Washington's ranges from 6.5% to 10%+.
- Retirement Income: Oregon partially taxes some; Washington taxes none.
- Property Tax: Oregon offers predictable increases; Washington varies with market value.
- Business & Investment: Oregon taxes income and investments; Washington has a B&O tax and 7% capital gains for high earners.
- Estate Tax: Oregon starts taxing at $1M; Washington at $2.193M with higher top rates.
- Cross-Border Workers: Oregon residents pay income tax even on Washington earnings.
- Best State? Washington favors earners and retirees; Oregon suits big spenders and stable budgets.
When it comes to Oregon vs Washington taxes, the differences are clear. They can shape how you build wealth. Oregon taxes income but has no sales tax. Washington skips income tax but charges more at the register.
These choices affect where people live, work, and retire.
Understanding these tax rules helps you plan smarter. Whether you're just starting out or thinking about retirement, knowing how to handle taxes leads to better financial decisions.
Tax Differences between Oregon and Washington
The tax differences between Oregon and Washington affect your paycheck, retirement savings, and how much you spend. On the State Tax Competitiveness Index, Oregon ranks 30th and Washington ranks 45th. Here’s a deeper look at how these taxes impact both workers and retirees.
Income Tax
For income tax, Oregon vs Washington is a hot debate (and for good reason.)
In Oregon, workers pay state income tax ranging from 4.75% to 9.9%. This takes a noticeable cut from take-home pay, especially for middle and high earners. For retirees, Oregon exempts Social Security income. Some retirement income, like pensions or IRA withdrawals, may be partially taxed depending on age and income.
There’s no state income tax for Washington. Workers keep more of their pay, which is a big advantage for those earning higher salaries. Retirees benefit too. All forms of retirement income, including pensions, IRAs, and Social Security, are fully exempt from state tax.
Impact: Washington offers more upfront savings for both earners and retirees. Oregon provides targeted relief for seniors, but it still taxes many retirement sources.
Sales Tax
When comparing Oregon vs Washington for taxes, Oregon has no sales tax, which means lower costs at checkout. Workers and retirees alike benefit from more predictable pricing on goods and services. This especially helps those on fixed incomes or with high consumer spending.
Sales tax ranges from 6.5% to over 10%, depending on local rates in Washington. Every day purchases, from groceries to clothes, cost more. Over time, this adds up, especially for families or retirees with limited income.
Impact: Oregon is better for consumers who spend more or want to avoid extra charges on essentials. Washington’s higher sales tax affects everyone equally.
Retirement Income Tax
Not sure if it’s better to retire in Oregon or Washington? Oregon offers partial deductions for certain retirement income. Social Security is tax-free in this state. Other income, like pensions and withdrawals from retirement accounts, may still face state tax.
On the other hand, Washington doesn't tax any form of retirement income. This includes Social Security, pensions, annuities, and retirement account withdrawals.
Impact: So, is it better to retire in Oregon or Washington? Retirees see more favorable treatment in Washington. Oregon’s retirement benefits depend on income level and age.
Property Tax
Oregon state laws control property taxes that limit yearly increases. This creates stability, which benefits retirees on fixed incomes. However, assessed values can lag behind market rates, affecting how much you actually pay.
Property taxes in Washington depend more closely on market value. While the effective tax rate is lower, homes in popular areas can result in high total bills. Workers may face higher mortgage-related costs. Retirees might need to budget more carefully.
Impact: Oregon offers more predictable property tax bills. Washington can be more volatile depending on home location and market trends.
Business and Investment Tax
Small business owners may face a corporate income tax and the Corporate Activity Tax (CAT) in Oregon. The rate is 6.6% on taxable income up to $1 million and 7.6% on taxable income over $1 million. Investment income may also be taxed at regular income tax rates.
No personal income tax means investment earnings aren't taxed at the state level in Washington. However, there’s a 7% capital gains tax on high earners. There’s a Business & Occupation (B&O) tax for companies based on gross revenue.
Impact: Washington may favor passive income and investors unless subject to capital gains rules. Oregon can be more burdensome for small businesses, but it lacks a capital gains tax. However, there are ways to reduce your capital gains tax.
Inheritance and Estate Tax
Neither Oregon nor Washington has an inheritance tax. That means beneficiaries do not pay state tax on money or assets they receive from a deceased person.
However, Oregon has a state estate tax that applies to estates valued over $1 million. Rates start around 10% and increase based on estate size. This threshold doesn’t adjust for inflation, so more estates are taxed over time.
Washington also has a state estate tax, but the exemption is higher—$2.193 million. Rates range from 10% to 20%. Washington’s top rate is among the highest in the country for large estates.
Impact: Washington gives more room before the tax kicks in, but larger estates pay more. Oregon applies its tax to smaller estates, making planning more important for middle-class households.
Living in Oregon and Working in Washington: Taxes and Considerations
If you live in Oregon, work in Washington, taxes get complicated fast in this setup.
Washington doesn’t tax wages, so your job income isn’t taxed by that state. But if you live in Oregon, you still owe Oregon state income tax on all earnings, even those made across the border.
That means you’ll likely file an Oregon state return. You won’t pay income tax to Washington, but your full income still gets taxed by Oregon.
There’s no double taxation, but there’s no escape either. Oregon residents must pay Oregon’s rates regardless of where they earn money. Washington doesn’t offer any tax credits or refunds to out-of-state workers.
Is Oregon or Washington Better for Taxes?
Choosing where to live long-term often comes down to one question: is Oregon or Washington better for taxes? If your income is high, Washington’s lack of a state income tax can help you save more upfront. But everyday spending comes with higher sales tax. Over time, that adds up.
Oregon offers savings on purchases thanks to no sales tax. For people who spend more than they earn, or who prioritize low day-to-day costs, this matters.
Homeowners should compare property taxes carefully. Oregon’s limits on yearly increases can help with budgeting. Washington’s lower rates sometimes offset higher home values.
Business owners and investors should also consider business and capital gains taxes. Washington’s new capital gains tax applies in some cases, which could shift the advantage depending on your portfolio.
For Oregon vs Washington for taxes, the better state depends on your income mix, spending habits, and financial goals. However, there’s a reason why Oregon is ranked more highly in the state tax competitiveness index. You just need the right experts to help you navigate wealth building.
Start building wealth in Oregon.
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
