Oregon's Estate Tax Laws
If you live in Oregon, you live in one of a handful of states that collects a state death tax. The estates of Oregon residents, as well as the estates of nonresidents who own real estate and/or tangible personal property located in Oregon, are subject to a state death tax. Below are the answers to nine common questions people ask about Oregon's estate or inheritance tax.
NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
Does Oregon Collect an Estate Tax or an Inheritance Tax?
Prior to 2012, the Oregon death tax was referred to as an inheritance tax in the Oregon code, but effective January 1, 2012, the Oregon death tax became known as an estate tax. This makes sense since Oregon's death tax is collected based on the value of the estate (hence, an estate tax), as opposed to being based on who inherits the estate (hence, an inheritance tax).
In this article, the Oregon death tax collected on or before December 31, 2011, is referred to as an inheritance tax, the Oregon death tax collected on or after January 1, 2012, is referred to as an estate tax, and both taxes are referred to in general as the death tax.
When Is an Estate Subject to the Oregon Inheritance Tax or Estate Tax?
For Oregon residents, an estate may be subject to the Oregon inheritance tax or estate tax if the total gross estate exceeds $1,000,000.
For nonresidents of Oregon, an estate may be subject to the Oregon inheritance tax or estate tax if it includes real estate and/or tangible personal property having a situs within the state of Oregon and the gross estate exceeds $1,000,000.
What Oregon Inheritance Tax or Estate Tax Forms Must be Filed?
For deaths that occurred on or before December 31, 2011, estates with a gross value that exceeds $1 million must file an Oregon inheritance tax return, Form IT-1 even if no Oregon inheritance tax will be due as a result of applicable deductions and exemptions.
For deaths that occurred on or after January 1, 2012, estates with a gross value that exceeds $1 million must file an Oregon estate tax return, Form OR706, even if no Oregon estate tax will be due as a result of applicable deductions and exemptions.
Are Oregon Registered Domestic Partners Treated the Same as Married Couples?
In 2007, the Oregon legislature passed law HB 2007. Under the provisions of this law, the instructions for the Form IT-1 were amended to provide that the term “surviving spouse” may be replaced with "surviving Oregon Registered Domestic Partner."
Are Transfers to a Surviving Spouse Taxable?
Outright transfers to a surviving spouse or registered domestic partner are not taxable.
For married couples who have used AB Trust planning to reduce their federal estate tax bill, an Oregon death tax may be due on the B Trust after the first spouse's death due to the gap of $10.4 million between the Oregon exemption of $1 million and the federal exemption of $11.4 million for 2019 following the passing of the Tax Cuts and Jobs Act in December 2017 by President Trump.
Nonetheless, a married decedent's estate can make an election to treat a trust of which the surviving spouse is the sole beneficiary as "special marital property" for purposes of calculating the Oregon death tax. Thus, married Oregon residents can defer payment of both Oregon and federal death taxes until after the death of the surviving spouse using ABC Trust planning.
When Are the Oregon Death Tax Return and Tax Payment Due?
The Oregon death tax return must be filed and any death tax due must be paid within nine months after the decedent's date of death.
An extension of time to file the Oregon death tax return and pay any tax due will be accepted for Oregon if granted by the Internal Revenue Service. If the estate does not have to file a federal estate tax return, then mark "For Oregon Only" at the top of IRS Form 4768 and federal guidelines will be used to consider the request. If an extension of time to pay is granted, the tax must be secured by collateral acceptable to the Oregon Department of Revenue.
In addition, an extension of time to file the return does not extend the time to pay the tax, and interest will accrue during the extension period.
Where Is the Oregon Death Tax Return Filed?
Mail the Oregon inheritance tax return, Form IT-1, or the Oregon estate tax return, Form OR706, and all other required forms and documentation to:
Oregon Department of Revenue
P.O. Box 14110
Salem, OR 97309-0910
If you are using a private delivery service such as FedEx or UPS, then use the following address:
Oregon Department of Revenue
955 Center Street NE
Salem, OR 97301-2555
What Are the Oregon Inheritance Tax or Estate Tax Rates?
For deaths that occurred on or before December 31, 2011, once the value of the net estate exceeded $1 million, the entire value of the estate was taxed. Inheritance tax rates ranged from 0.8 percent to 16 percent of the adjusted taxable estate.
For deaths that occurred on or after January 1, 2012, the first $1,000,000 of an estate is exempt from the estate tax calculation. For the estate tax rates for 2019, refer to this table provided by Pacific Northwest Probate. The table shows the 2018 rates; however, the state's estate tax exemption amount of only $1 million was set in 2001 and is not pegged to inflation. This exemption, and the marginal tax rates will remain in effect until further revised or repealed by statute.
Where Can I Find Additional Information About Oregon Death Taxes?
For more information about Oregon inheritance taxes and estate taxes, refer to the Estate and Trust Taxes section of the Oregon Department of Revenue's website.