Payroll Tax in Oregon: Complete Guide 2026
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Payroll Tax in Oregon: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Oregon’s payroll tax system is among the most complex on the West Coast. In addition to a steeply graduated state income tax (with a top rate of ~9.9%), employers and employees must contribute to Paid Leave Oregon, the statewide transit tax, and standard unemployment insurance. Oregon also has no general sales tax, which means the state relies more heavily on income and payroll taxes to fund public services, resulting in higher rates than many other states.
Oregon Payroll Tax Rates (2026)
| Tax | Rate | Paid By | Wage Base |
|---|---|---|---|
| State Income Tax Withholding | ~4.75% to ~9.90% (graduated) | Employer withholds from employee | All taxable wages |
| State Unemployment Insurance (SUI) | ~0.7% to ~5.4% | Employer | First ~$52,800 per employee |
| Paid Leave Oregon (PLO) | ~1.0% total | Employer (~40%) + Employee (~60%) | All wages (no cap) |
| Statewide Transit Tax | ~0.10% | Employee | All wages (no cap) |
| Workers’ Benefit Fund | ~$0.028 per hours-worked | Employer + Employee (split) | Per hours-worked |
| Federal FICA — Social Security | ~6.2% each | Employer + Employee | First ~$168,600 |
| Federal FICA — Medicare | ~1.45% each | Employer + Employee | No cap |
| Additional Medicare (high earners) | ~0.9% | Employee only | Wages over ~$200,000 |
Oregon’s top income tax rate of ~9.90% is the highest among states without a local income tax, placing a significant withholding burden on higher-earning employees.
How Oregon Payroll Tax Works
State Income Tax Withholding
Oregon’s progressive income tax has ~4 brackets, starting at ~4.75% on the first approximately ~$4,050 of taxable income (single filer) and reaching ~9.90% on income above approximately ~$125,000 (single) or ~$250,000 (joint). An additional ~8.75% rate applies to income between approximately ~$10,200 and ~$125,000. Employers use withholding tables from the Oregon Department of Revenue based on the employee’s Form OR-W-4. Oregon requires state-specific W-4 forms; employers cannot rely solely on federal W-4 elections.
Paid Leave Oregon (PLO)
Paid Leave Oregon provides up to ~12 weeks of paid family, medical, or safe leave (with up to ~2 additional weeks for pregnancy-related conditions). The total premium rate is projected at approximately ~1.0% of all wages with no wage cap. Employers with ~25 or more employees pay approximately ~40% of the total premium (roughly ~0.40%), and employees pay the remaining ~60% (roughly ~0.60%). Employers with fewer than ~25 employees are not required to pay the employer share but must still withhold the employee portion. The maximum weekly benefit is projected at approximately ~$1,525, one of the highest PFML benefits in the nation.
Statewide Transit Tax
Oregon imposes a statewide transit tax of approximately ~0.10% on all wages, with no cap. This tax is paid entirely by the employee, but employers must withhold and remit it. The statewide transit tax funds public transportation improvements and is separate from any local transit district taxes (such as the TriMet and Lane Transit District payroll taxes paid by employers in the Portland and Eugene metro areas).
State Unemployment Insurance (SUI)
Employers pay SUI on the first approximately ~$52,800 of each employee’s annual wages, one of the highest taxable wage bases in the country. New employers typically receive a standard rate of approximately ~2.1%. Experience-rated employers see rates ranging from approximately ~0.7% to ~5.4%. Oregon also assesses additional contributions for the UI Equity Fund and the Supplemental Employment Department Administrative Fund, which can add ~0.01% to ~0.09% to the effective rate.
Workers’ Benefit Fund
All employers must pay into the Oregon Workers’ Benefit Fund at a rate of approximately ~$0.028 per hours-worked, split equally between employer and employee. This fund supports injured workers’ benefits and is separate from workers’ compensation insurance.
Comparison to Neighboring States
| Metric | Oregon | Washington | California | Idaho | National Avg. |
|---|---|---|---|---|---|
| State income tax top rate | ~9.90% | None | ~13.3% | ~5.80% | Varies |
| SUI taxable wage base | ~$52,800 | ~$68,500 | ~$7,000 | ~$53,500 | ~$16,000 |
| PFML premium | ~1.0% (shared) | ~0.74% (shared) | ~1.1% (employee) | None | ~0.4% |
| Transit tax | ~0.10% (employee) | None | None | None | N/A |
| Est. total employer cost per ~$50K employee | ~$4,700 | ~$4,500 | ~$4,900 | ~$3,800 | ~$4,300 |
Oregon’s combined payroll obligations are above the national average, driven by the high SUI wage base and the Paid Leave Oregon program.
Tips for Minimizing Payroll Tax Burden
- Leverage the PLO small-employer exemption. Employers with fewer than ~25 employees are exempt from the employer share of Paid Leave Oregon premiums, saving approximately ~0.40% of payroll.
- Manage SUI experience ratings. With a ~$52,800 wage base, even small rate reductions generate significant per-employee savings. Contest improper claims.
- Use Oregon-specific W-4 forms. Oregon does not accept the federal W-4 for state withholding. Ensure all employees have a current Form OR-W-4 on file.
- Track local transit district taxes separately. Employers in the Portland metro area pay the TriMet tax (~0.7937%) and Lane Transit District tax (~0.77%) in addition to the statewide transit tax. These are employer-paid and require separate reporting.
- File quarterly reports through Frances Online. Oregon’s Frances Online system handles SUI, PLO, and transit tax reporting in a single portal.
- Review Workers’ Benefit Fund withholding. The per-hours-worked rate changes annually. Update payroll systems each January.
- Budget for the high SUI wage base. At ~$52,800, the wage base means SUI costs extend through most of the year for lower-paid employees, increasing cash flow requirements.
Key Takeaways
- Oregon’s progressive income tax reaches ~9.90% on income above approximately ~$125,000, one of the highest state income tax rates in the nation
- Paid Leave Oregon premiums total approximately ~1.0% of all wages (no cap), split ~40% employer / ~60% employee for businesses with ~25 or more employees
- The statewide transit tax of ~0.10% is paid by employees on all wages, with employers responsible for withholding
- SUI rates range from ~0.7% to ~5.4% on the first approximately ~$52,800 of wages, one of the highest wage bases nationally
- Employers with fewer than ~25 employees are exempt from the employer share of Paid Leave Oregon
- Estimated total employer cost per ~$50,000 employee is approximately ~$4,700
Next Steps
- See the full state picture at Taxes in Oregon: State Tax Guide 2026
- Compare state tax burdens at State Income Tax Rates Comparison 2026
- Learn about federal payroll obligations in the Self-Employment Tax Guide
- Calculate your federal bracket with the Tax Bracket Calculator 2026
- Get local help: Find a CPA Near You