Active-duty pay
Taxed
Active-duty pay taxable to OR residents.
State Guide · OR
Oregon — Military Tax Treatment
Oregon's military retirement treatment is among the most complex in the country. The federal pension subtraction has multiple calculation methods depending on when you first contributed to your pension. Work with a tax professional who knows Oregon military pay rules.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable Oregon income.
Military retirement pay
Partially Exempt
Federal pension subtraction available — rules are complex and depend on your service dates and income level. See Oregon DoR guidance.
The numbers · verified for tax year 2025
Top marginal rate
9.9%
Retirement-pay exemption
Conditional
Military retirement pay is generally taxable, but the portion attributable to service performed before Oct 1, 1991 may be subtracted (pro-rated by months of service before vs. after that date); the post-1991 portion is taxable.
Standard deduction
For 2025 the standard deduction is $2,835 single / $5,670 married filing jointly. Oregon’s four brackets top out at 9.9%.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Oregon included.
Survivor Benefit Plan (SBP)
Follows retirement
SBP treatment in Oregon follows the same complex federal pension subtraction rules. Verify with Oregon DoR.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Oregon, Oregon cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Oregon can keep Texas as their tax domicile and avoid Oregon state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Oregon exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01OR Schedule OR-ASC for federal pension subtraction
- 02The calculation differs depending on whether your first contribution to the pension was before or after 1987
- 03Oregon does NOT have a simple blanket military retirement exemption — read the instructions carefully or use a tax pro
Veteran-specific tax benefits
Disabled veteran property tax exemption.
Official authority
https://www.oregon.gov/dor/ ↗State tax law changes annually. Verify current rules with the Oregon Department of Revenue before making any tax decision.
Oregon military tax — common questions
Does Oregon tax military retirement pay in 2026?
Oregon partially taxes military retirement pay. Federal pension subtraction available — rules are complex and depend on your service dates and income level. See Oregon DoR guidance.
Does Oregon tax active-duty military pay?
Oregon taxes active-duty military pay for state residents. Active-duty pay taxable to OR residents. Under the SCRA, Oregon can only tax the military pay of service members who are legally domiciled in Oregon — not those merely stationed there.
Does Oregon tax National Guard and Reserve drill pay?
Oregon taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable Oregon income.
Is VA disability compensation taxed in Oregon?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Oregon — taxes it as income.
If I'm stationed in Oregon but claim another state, can Oregon tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Oregon cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides