Oregon Estate Tax Overview
Oregon is one of twelve states (plus D.C.) that impose a state estate tax. With a fixed $1,000,000 exemption — the lowest in the nation alongside Massachusetts — Oregon catches many estates that owe nothing at the federal level. The exemption has not been indexed for inflation and has remained at $1 million since Oregon decoupled from the federal estate tax in 2003.
I work with Oregon residents and non-residents who own Oregon property on estate tax planning, lifetime gifting strategies, credit shelter trust design, and Natural Resource Credit qualification for family farms and timber operations. Oregon's low exemption makes proactive planning essential for anyone with a home, retirement accounts, and life insurance — a combination that easily exceeds $1 million.
Key advantage: Oregon has no state gift tax, no gift clawback, and no inheritance tax. Every dollar gifted during life permanently reduces the Oregon taxable estate. For a married couple, annual exclusion gifts alone ($36,000/year per donee with gift splitting) can move substantial wealth out of the estate over time.
Oregon Estate Tax Calculator
Estimate Oregon estate tax using the $1M exemption and graduated rate schedule under ORS Chapter 118.
Oregon Estate Tax Deep Dive
The $1 Million Exemption Problem
Oregon's $1 million exemption has not changed since 2003. Adjusted for inflation, $1 million in 2003 is equivalent to approximately $1.7 million in 2024. This means the real exemption has eroded by nearly 40%. Meanwhile, the average Oregon home value has more than tripled in many metropolitan areas. A Portland-area homeowner with a paid-off house, retirement accounts, and a life insurance policy can easily have a taxable estate exceeding $1 million.
Graduated Rate Structure (ORS 118.010)
| Taxable Estate Above $1M | Rate | Tax at Top of Bracket |
|---|---|---|
| $0 – $500,000 | 10.00% | $50,000 |
| $500,001 – $1,500,000 | 10.25% | $152,500 |
| $1,500,001 – $2,500,000 | 10.50% | $257,500 |
| $2,500,001 – $3,500,000 | 11.00% | $367,500 |
| $3,500,001 – $4,500,000 | 11.50% | $482,500 |
| $4,500,001 – $5,500,000 | 12.00% | $602,500 |
| $5,500,001 – $6,500,000 | 13.00% | $732,500 |
| $6,500,001 – $7,500,000 | 14.00% | $872,500 |
| $7,500,001 – $8,500,000 | 15.00% | $1,022,500 |
| Over $8,500,000 | 16.00% | — |
No Cliff Provision
Unlike New York, Oregon does not have a cliff provision. The $1M exemption is a true exclusion — only amounts above $1 million are taxed. An estate of $1,000,001 triggers approximately $0.10 in Oregon estate tax (10% of $1). This is a significant advantage over NY's devastating cliff where exceeding the exemption by even a small amount can generate hundreds of thousands in tax.
Comparison: Oregon vs. Washington
For residents of the Portland/Vancouver metro area, the Oregon-Washington border creates planning opportunities:
| Feature | Oregon | Washington |
|---|---|---|
| Exemption | $1,000,000 (fixed) | $2,193,000 (CPI-indexed) |
| Top Rate | 16% | 20% |
| Gift Tax | None | None |
| Income Tax | Up to 9.9% | 7% on capital gains only |
| Sales Tax | None | 6.5% + local |
| Portability | No | No |
Oregon Natural Resource Credit (ORS 118.140)
The Natural Resource Credit is Oregon's most valuable estate tax benefit for qualifying farm, forestland, and fishing operations. The credit can reduce or completely eliminate the Oregon estate tax for family agricultural operations.
Qualifying Property
- Farmland: Property used in farming operations as defined under ORS 308A.056 (farm use special assessment). Includes cropland, pasture, orchards, vineyards, and nurseries.
- Forestland: Property classified as forestland under ORS 321.201–321.222 or used for commercial timber production. Includes land under a forest management plan.
- Fishing operations: Commercial fishing vessels, permits, and related equipment used in commercial fishing activities.
Qualification Requirements
- The property must have been used as a farm, forest, or fishing operation for at least 5 of the 8 years preceding the decedent's death
- The decedent or a family member must have materially participated in the operation during the qualifying period
- The property must be included in the Oregon taxable estate
- The executor must elect the credit on Form OR-706
Credit Calculation
The credit equals the lesser of: (a) the Oregon estate tax attributable to the natural resource property, or (b) the total Oregon estate tax liability. In practice, this means that if the natural resource property represents all or most of the estate, the credit can eliminate the entire Oregon estate tax. For mixed estates (containing both natural resource and non-natural resource property), the credit is prorated.
Recapture warning: If the qualifying property is sold or ceases to be used as a natural resource within 10 years of the decedent's death, the credit may be recaptured. The recapture amount decreases by 20% per year, fully phasing out after 5 years for some property types. Heirs should maintain the qualifying use for at least 5 years to avoid recapture.
Lifetime Gifting: The Primary Strategy
With Oregon's low $1M exemption, the most effective planning strategy is systematic lifetime gifting. Oregon has no gift tax and no clawback, making every gift a permanent reduction in the taxable estate.
- Annual exclusion: $18,000 per donee (2024). A couple with 3 children and 6 grandchildren can gift $324,000/year without any gift tax implications.
- Direct education/medical: Unlimited gifts paid directly to educational institutions or medical providers under IRC 2503(e).
- Gifts of appreciating assets: Transfer assets expected to grow (business interests, investment property) to lock in today's lower value and remove future appreciation from the estate.
Credit Shelter Trust (Essential)
Oregon has no portability. A credit shelter trust funded at the first death with $1M preserves both spouses' exemptions. Without it, a couple with $2M wastes an entire $1M exemption.
ILIT for Life Insurance
Life insurance is a major estate tax trap in Oregon. A $500,000 term policy that costs nothing to maintain can push an estate over the $1M threshold. Solution: an ILIT owns the policy, keeping proceeds out of both the Oregon and federal taxable estates.
Charitable Planning
Oregon allows a full charitable deduction, same as the federal system. Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) can reduce the taxable estate while providing income streams or supporting philanthropic goals.
Domicile Change Considerations
For high-net-worth Oregon residents, changing domicile to a state without an estate tax (Florida, Texas, Nevada) eliminates Oregon estate tax on non-Oregon assets. However:
- Oregon real property remains subject to OR estate tax regardless of domicile
- Oregon may audit domicile changes — maintain clean records of your new domicile (voter registration, driver's license, time logs)
- Oregon income tax may continue to apply to Oregon-source income
The Oregon QTIP Election — A Powerful Tool
Oregon allows an independent QTIP election separate from the federal election. This creates a valuable planning opportunity:
- Make a federal QTIP election for all property passing to the surviving spouse's trust (to defer federal tax using the marital deduction)
- Do NOT make an Oregon QTIP election for the portion up to $1M (to use the first spouse's Oregon exemption now)
- Result: the first $1M passes free of Oregon tax using the first spouse's exemption, while the federal marital deduction still defers all federal tax
Example: Husband dies with $3M estate, all in a QTIP trust for wife. Federal QTIP election: yes (defers all federal tax). Oregon QTIP election: yes on $2M, no on $1M. Result: $1M uses husband's OR exemption = $0 OR tax now. $2M enters QTIP for wife, taxed at her death against her $1M exemption. This saves approximately $99,500 in OR estate tax vs. deferring everything.
Credit Shelter Trust Design
For Oregon couples, I recommend a flexible trust structure that:
- Funds a credit shelter trust with $1M at the first death (matching the OR exemption)
- Gives the surviving spouse a testamentary power of appointment over the credit shelter trust (for flexibility)
- Uses a QTIP trust for the balance, with the independent Oregon QTIP election available
- Includes a disclaimer provision allowing post-mortem optimization
Disclaimer Planning
Oregon recognizes qualified disclaimers under ORS 112.652. A surviving spouse can disclaim assets to redirect them into a credit shelter trust, optimizing the use of the first spouse's $1M Oregon exemption. The disclaimer must be made within 9 months of the decedent's death and before the disclaimant accepts any benefit from the property.
Non-Resident Oregon Estate Tax
Non-residents who own Oregon real property or tangible personal property located in Oregon may owe Oregon estate tax. The tax calculation involves two steps:
- Compute the Oregon estate tax as if the decedent were an Oregon resident (on the entire estate)
- Prorate the tax based on the ratio of Oregon-situs property to total gross estate
This means non-residents get the benefit of the $1M exemption proportionally. If Oregon property represents 20% of a $5M estate, the effective exemption attributable to Oregon property is $200,000.
Oregon-Situs Property
- Real property: All real estate located in Oregon (homes, land, commercial property)
- Tangible personal property: Physical items located in Oregon (vehicles, artwork, collectibles, business equipment)
- NOT included: Intangible property (stocks, bonds, bank accounts, partnership interests) — these follow the domicile state
Planning for Non-Residents
Non-residents can use several strategies to minimize Oregon exposure:
- Hold Oregon real property in an LLC or trust (may convert real property to intangible property for estate tax purposes — consult Oregon counsel)
- Gift Oregon property during life (no OR gift tax or clawback)
- Use a QPRT to transfer an Oregon vacation home at reduced gift tax value
Frequently Asked Questions — Oregon Estate Tax
Yes. Oregon imposes a state estate tax under ORS Chapter 118. Oregon's exemption is $1,000,000 — tied with Massachusetts for the lowest state estate tax exemption in the country. Rates range from approximately 10% to 16% on estates above the exemption. Oregon has no inheritance tax and no state gift tax.
Oregon's estate tax exemption is $1,000,000 per person. Unlike Rhode Island's CPI-indexed exemption, Oregon's has remained fixed at $1 million since the state decoupled from the federal estate tax in 2003. There is no legislative proposal to increase it.
Oregon uses graduated rates from approximately 10% on the first taxable dollar above the $1M exemption to 16% on amounts exceeding $9.5 million. The rate structure: 10% on $1M–$1.5M, 10.25% on $1.5M–$2.5M, 10.5% on $2.5M–$3.5M, 11% on $3.5M–$4.5M, 11.5% on $4.5M–$5.5M, 12% on $5.5M–$6.5M, 13% on $6.5M–$7.5M, 14% on $7.5M–$8.5M, 15% on $8.5M–$9.5M, and 16% above $9.5M.
No. Oregon does not impose a state gift tax. And unlike New York, there is no gift clawback provision. Gifts made during life permanently reduce the Oregon taxable estate. This makes systematic lifetime gifting the single most effective strategy for reducing Oregon estate tax exposure.
Under ORS 118.140, Oregon provides a credit for qualifying natural resource property (farmland, forestland, and fishing operations) included in the taxable estate. The credit equals the lesser of the tax attributable to the natural resource property or the full estate tax liability. The property must have been operated as a farm, forest, or fishing business for at least 5 of the 8 years preceding the decedent's death.
No. Oregon does not impose an inheritance tax. The estate tax is paid by the estate, not by individual beneficiaries.
Oregon Form OR-706 is due 9 months from the date of death, the same deadline as the federal Form 706. A 6-month extension may be obtained. However, any tax due must be paid by the original deadline to avoid interest charges.
No. Oregon does not allow portability of the estate tax exemption between spouses. If the first spouse dies without using their $1M exemption (e.g., by leaving everything to the surviving spouse via marital deduction), that exemption is permanently lost. A credit shelter trust is essential for married couples.
Moving out of Oregon can eliminate estate tax on non-Oregon assets, but Oregon will still tax real property and tangible personal property located in Oregon owned by non-residents. Domicile changes must be genuine — Oregon may audit domicile claims, examining voting registration, driver's license, time spent in state, and where near and dear items are kept.
Washington has a $2,193,000 exemption (2024, CPI-indexed) with rates from 10% to 20%. Oregon's exemption is lower ($1M, not indexed) but its top rate (16%) is lower than Washington's (20%). Both states have no gift tax and no inheritance tax. For residents of the Portland metro area who live in Washington (e.g., Vancouver), Washington's higher exemption can be advantageous.
An Oregon estate tax return (Form OR-706) must be filed if the decedent was an Oregon resident with a gross estate exceeding $1,000,000, or a non-resident who owned Oregon real or tangible personal property and whose total gross estate exceeds $1,000,000.
Yes. If a QTIP election was made for Oregon estate tax purposes at the first death, the QTIP property is included in the surviving spouse's Oregon estate. Oregon allows an independent QTIP election separate from the federal election — you can make a federal QTIP election (to defer federal tax) while not making an Oregon QTIP election (to use the first spouse's $1M Oregon exemption).
Yes, and this is the most effective strategy. Oregon has no gift tax, no gift clawback, and no lookback period. Every dollar gifted permanently reduces the taxable estate. Annual exclusion gifts ($18,000 per donee in 2024), direct tuition payments, and direct medical payments are especially effective.
If the federal exemption drops to ~$7M after the TCJA sunset (expected 2026), more estates will face both federal AND Oregon tax. Currently, estates between $1M and $13.61M face Oregon-only tax. After sunset, estates above ~$7M face both. Pre-sunset gifting can lock in the current high federal exemption while also reducing Oregon estate tax exposure.
Life insurance proceeds are included in the Oregon taxable estate if the decedent owned the policy or had incidents of ownership at death. Using an irrevocable life insurance trust (ILIT) removes the proceeds from both the federal and Oregon taxable estates. Given Oregon's low $1M exemption, even modest life insurance policies can trigger estate tax.
A credit shelter trust (bypass trust) is funded at the first spouse's death with assets up to the Oregon exemption ($1M). The surviving spouse receives income and may access principal, but the trust assets pass to beneficiaries at the second death without estate tax. Because Oregon has no portability, this trust is the only way to use both spouses' exemptions.
Oregon does not have a statewide real estate transfer tax for most transactions. However, some jurisdictions have implemented transfer taxes for affordable housing purposes after the partial lifting of the prohibition in 2023. Transfers at death are generally exempt.
Yes. Non-residents who own Oregon real property or tangible personal property located in Oregon may owe Oregon estate tax. The tax is computed on the entire estate as if the person were an Oregon resident, then prorated based on the percentage of Oregon-situs property.
Oregon is not a community property state — it follows the common-law (separate property) system. However, Oregon recognizes community property agreements validly created in another state. There is no Oregon-specific community property election for estate tax purposes.
Oregon generally conforms to federal deductions including: the unlimited marital deduction, charitable deduction, debts and administration expenses, funeral expenses, and certain state/local taxes. The Natural Resource Credit is applied after computing the tax, providing additional relief for qualifying farms and forestland.
Related Resources
Discuss Your Oregon Estate Plan
I help Oregon residents and non-residents with estate tax planning, credit shelter trust design, Natural Resource Credit qualification, and lifetime gifting strategies. Schedule a consultation to discuss your situation.