Oregon retired pay
Is military retirement taxed in Oregon?
Partly taxed
Partly. Only Service Before Oct. 1991 Counts.
Only the part earned before October 1, 1991. Oregon subtracts the share of a federal pension, military retired pay included, that matches months of service (or Reserve retirement points) before that date divided by total service. A retiree whose service all came after September 30, 1991 pays Oregon tax on every dollar, at rates up to 9.9%.
- The law
- ORS 316.680(1)(e)
- Current rule since
- service before October 1, 1991 only (ORS 316.680(1)(e)), applied the same way in the 2025 Publication OR-17; the pages read do not state the year the subtraction was enacted
- Where you claim it
- Schedule OR-ASC, section B, subtraction code 307 (Federal pension income); the section B total on line B7 goes to Form OR-40, line 13
Read on Oregon’s own sources October 9, 2026
What Oregon’s rule is worth on your retired pay
Enter your annual taxable retired pay (box 2a of your DFAS or Coast Guard 1099-R). The rate starts at Oregon’s top 9.9% rate for 2025 (taxable income over $125,000, or $250,000 joint) for tax year 2025; change it to your own bracket if you know it.
One rate applied to the whole amount, not Oregon’s full return: brackets, other income, deductions and credits change the real figure. Use it to compare, then check the state’s own form instructions.
How it works in Oregon
Gather your service dates or, for Guard and Reserve retirees, your Chronological Statement of Retirement Points. The worksheet in Publication OR-17 divides months of federal service before October 1, 1991 by total months of federal service, rounds to three decimal places, and applies that percentage to the pension included in federal AGI. Once set, the percentage carries forward every year.
Count months the way the worksheet says. A service start on the 1st through 15th counts that month; a start on the 16th or later skips it. At the end it flips: a retirement date on the 16th or later counts the final month, and one on the 1st through 15th does not.
Assume a career from June 1, 1986 to May 31, 2006. That is 64 months before October 1, 1991 out of 240, a percentage of 0.267. On a $36,000 pension, $9,612 is subtracted and $26,388 is taxed. At the 8.75% rate, which the 2025 rate chart applies to single taxable income from $50,000 to $125,000, the subtraction is worth about $841.
Reserve and Guard retirees can divide points earned before October 1, 1991 by total points instead of counting months, as the second example in Publication OR-17 does for an Army Reserve retiree.
Enter the amount on Schedule OR-ASC, section B, with subtraction code 307 and keep the worksheet with your permanent records. Part-year residents use Schedule OR-ASC-NP and include only pension received while an Oregon resident, unless they kept an Oregon domicile during the nonresident months.
Survivor Benefit Plan annuities
Prorated the same way. Publication OR-17 says the federal pension subtraction includes benefits paid to the retiree or the beneficiary, and ORS 316.680(1)(e) defines a federal pension to include payments to retirees' beneficiaries, so a Survivor Benefit Plan annuity uses the retiree's pre-October 1991 percentage.
Active-duty pay in Oregon
Partly exempt. Oregon subtracts military pay earned while stationed outside Oregon, Guard or Reserve pay for 21 or more days away from home, and Oregon National Guard state active service; other military pay, including pay for service inside Oregon, gets only a $6,000 subtraction (code 319, 2025 Publication OR-17).
Missed it in an earlier year?
If the original return was filed within three years of its due date, you can amend for a refund until the latest of three years from the due date, three years from the date you filed, or two years from the date you paid the tax (2025 Publication OR-17).
What trips Oregon retirees up
- There is no flat Oregon exclusion for military retired pay. A 20-year retiree who enlisted in 1995 gets nothing from code 307 and owes Oregon tax on the full pension.
- The 9% retirement income credit (ORS 316.157, credit code 811) counts military pay that was not subtracted, but it requires age 62, household income under $22,500 ($45,000 joint) and Social Security under $7,500 ($15,000 joint). Household income includes the pension, so a single retiree whose pension alone reaches $22,500 misses it.
- ORS 316.680(1)(e)(B) keeps the subtraction alive only while Oregon's 1995 PERS benefit increases remain in effect or PERS benefits for service before October 1, 1991 stay exempt. The 2025 guide still applies it, but the condition sits in the statute.
- Publication OR-17 leaves disability payments received before minimum retirement age out of the subtraction.
Federal side: DFAS reports retired pay on Form 1099-R, and the IRS taxes it as a pension. VA disability compensation is not taxable income under federal law (IRS Publication 525). The SCRA’s tax-home rule (50 U.S.C. § 4001) protects servicemembers on orders, not retirees, so where a retiree lives decides which state taxes the pension. Compare every state on the 51-state ledger. Oregon’s other servicemember protections are on the Oregon SCRA page.
Frequently asked questions
Does Oregon tax military retirement?
Yes, except for the share earned before October 1, 1991. ORS 316.680(1)(e) subtracts federal pension income attributable to federal service before that date, and the 2025 Publication OR-17 applies it to military retired pay through subtraction code 307 on Schedule OR-ASC. The share is months of service before October 1, 1991 divided by total months. Someone who entered service after September 1991 has no subtraction and pays Oregon tax on the full pension, at rates that reach 9.9% on taxable income over $125,000 single or $250,000 joint.
How do I calculate the Oregon federal pension subtraction?
Use the worksheet in Publication OR-17. Divide your months of federal service before October 1, 1991 by your total months of federal service, round to three decimal places, and multiply by the pension included in federal AGI. Count a starting month if you began on the 1st through 15th, and count the final month if you retired on the 16th or later. Reserve and Guard retirees can use retirement points from the Chronological Statement of Retirement Points instead of months. Once set, the percentage stays the same every year.
Is SBP taxed in Oregon?
Mostly. Publication OR-17 says the federal pension subtraction includes benefits paid to the retiree or the beneficiary, so a Survivor Benefit Plan annuity gets the same pre-October 1991 percentage the retiree would have used. If the retiree's service began after September 30, 1991, the survivor's annuity is fully taxable in Oregon. The beneficiary claims the subtraction on Schedule OR-ASC with code 307, per the 2025 guide read October 9, 2026.
I joined the military after 1991. Is any of my retirement exempt in Oregon?
Not through the federal pension subtraction, which reaches only service before October 1, 1991. The other retirement break, the 9% retirement income credit under ORS 316.157, requires age 62, household income under $22,500 ($45,000 joint) and Social Security under $7,500 ($15,000 joint), per the 2025 Publication OR-17. A pension of $22,500 or more ($45,000 joint) puts household income over those limits by itself. Oregon does subtract active-duty pay earned outside the state, but nothing in the 2025 guide exempts retired pay earned after 1991.
Sources, read October 9, 2026
Heads up: SCRA Saver publishes general information, not legal or financial advice. Laws change and every situation differs. Confirm details with your installation legal assistance office (free for service members) or a licensed professional.