If you're a resident of Oregon and leave behind more than $1 million (for deaths occurring in 2023), your estate might have to pay Oregon estate tax. In November 2012, Oregon voters rejected a ballot measure that would have repealed the state's estate tax—and so the tax continues today. In 2023, legislation (SB662) proposes to raise Oregon's estate tax exemption to match the federal exemption.
The Oregon tax is different from the federal estate tax, which is imposed on estates worth more than $12.92 million (for deaths in 2023). So even if your estate isn't large enough to owe federal estate tax, it might still owe Oregon estate tax.
But it's not just state residents who might owe Oregon estate tax. If you're a nonresident but own real estate or other tangible assets (a boat or plane, for example) located in Oregon, your estate might also need to file an Oregon estate tax return.
Terminology note: Until 2012, the Oregon estate tax was called an "inheritance tax." It has always, however, worked like what other states call an estate tax, meaning that the tax applies to estates higher than a certain value. (Inheritance taxes, by contrast, look at the relationship between the inheritor and the deceased person. Close relatives pay nothing or low tax rates, while more distant relatives or non-family members pay a higher tax rate.)
If the gross estate of an Oregon resident has a value of more than $1 million, the personal representative or executor of the estate must file a state estate tax return. (Smaller estates won't need to file a return.) Your gross estate will include just about all of the property you own at your death:
If you own assets with someone else, generally only your share will be included in your estate. In other words, if you and your spouse own your house, half of its value would be included in your estate.
Notably, your gross estate also includes non-probate assets. For example, the property you hold in a revocable living trust avoids probate, but it does not avoid estate taxes, and is counted in your gross estate.
Portability. The federal estate tax regime allows a surviving spouse to use the deceased spouse's unused portion of the exemption—a feature called "portability." However, Oregon's estate tax does not offer portability between spouses; each spouse has an exemption amount of $1 million.
Even if an Oregon estate tax return must be filed, it doesn't necessarily mean that the estate will owe estate tax. Your estate might be able to take certain deductions that lower the value of your estate below $1 million, in which case no estate tax will be due. These deductions include:
If your estate owes estate tax, how much will it actually owe? In Oregon, the tax rate currently ranges from 10 to 16%. Within this range, the rate increases with the size of the estate. (Compare these rates to the current federal rate of 40%.) See the Form OR-706 Instructions for a table of the exact estate tax rates in 2021.
If a return is required, it's due nine months after the date of death. The executor can request a six-month extension to file the return. This extension applies to the return itself, but not to the payment of the tax. If the tax isn't paid on time, there's a penalty, and interest accrues on the unpaid amount.
Your executor will likely have to hire professional help (an experienced lawyer or CPA) to prepare the Oregon estate tax return. The estate's funds can be used to pay for professional fees. Estate tax forms and instructions are available at the Oregon Department of Revenue.
For more on estate planning issues specific to Oregon, see Nolo's Oregon Estate Planning section.