Complete Guide to Oregon LLC Taxes in 2025
Oregon presents a unique tax landscape for LLC owners. The state has one of the highest top marginal income tax rates in the country at 9.9%, but compensates with no statewide sales tax -- one of only five states with that distinction. Understanding how Oregon's progressive income tax brackets, the $150 minimum tax, and the Corporate Activity Tax (CAT) interact is essential for any LLC operating in the Beaver State.
How Oregon Taxes LLCs
Oregon treats LLCs as pass-through entities by default, consistent with federal tax treatment. The LLC itself does not pay Oregon income tax as a separate entity. Instead, each member reports their distributive share of the LLC's income on their personal Oregon income tax return. Single-member LLCs report on Oregon Form 40, while multi-member LLCs file Oregon Form 65 (Partnership Return) as an informational return.
However, Oregon does impose a $150 minimum tax on LLCs and partnerships that have Oregon-source income or conduct business in the state. This minimum applies even if the LLC has a net loss for the year. The minimum tax is paid at the entity level and reported on the Oregon partnership return.
Key Point: Oregon's top marginal rate of 9.9% kicks in at just $125,000 for single filers. This is one of the lowest thresholds for a top bracket in the nation, meaning even moderately profitable LLCs face the highest rate on a significant portion of income.
Oregon Income Tax Brackets for 2025
Oregon's individual income tax uses a progressive bracket system. LLC members pay tax on their share of profits at these rates:
| Taxable Income (Single) | Rate | Taxable Income (MFJ) |
|---|---|---|
| $0 - $4,050 | 4.75% | $0 - $8,100 |
| $4,050 - $10,200 | 6.75% | $8,100 - $20,400 |
| $10,200 - $125,000 | 8.75% | $20,400 - $250,000 |
| Over $125,000 | 9.9% | Over $250,000 |
Oregon Corporate Activity Tax (CAT)
The Oregon Corporate Activity Tax (CAT), enacted in 2019, applies to all business entity types -- including LLCs -- with more than $750,000 in commercial activity (gross receipts) from Oregon sources. The tax rate is 0.57% on commercial activity exceeding $1 million, after a 35% subtraction for certain labor costs or cost of goods sold (whichever is greater).
Businesses with commercial activity between $750,000 and $1 million must register but pay only the minimum of $250. Those above $1 million calculate tax as: $250 + 0.57% x (commercial activity over $1 million - 35% subtraction). This tax is in addition to the regular Oregon income tax and cannot be offset by income tax credits.
Important: The CAT is a gross receipts tax, not an income tax. Even unprofitable LLCs with over $1 million in Oregon commercial activity must pay. This is a critical consideration for high-revenue, low-margin businesses operating in Oregon.
No Sales Tax -- But What It Means for LLCs
Oregon has no statewide sales tax, which is a significant advantage for certain businesses. Retailers, e-commerce businesses, and service providers operating within Oregon do not need to collect or remit state sales tax. This simplifies compliance and can make pricing more competitive.
However, there are important caveats. Oregon LLCs selling to customers in other states may still have economic nexus obligations. If your LLC has significant sales (typically $100,000+ or 200+ transactions) in a state with sales tax, you may need to register, collect, and remit sales tax in that state. The Supreme Court's South Dakota v. Wayfair (2018) decision expanded these obligations nationwide.
Additionally, some Oregon local jurisdictions have limited excise or transaction taxes. Multnomah County, for example, has imposed various business-related taxes that affect LLC operations in the Portland metro area.
Oregon LLC Annual Report
Every Oregon LLC must file an Annual Report with the Oregon Secretary of State. The filing fee is $100. The report is due on the anniversary of the LLC's formation date. If you fail to file for two consecutive years, Oregon will administratively dissolve your LLC.
The Annual Report is a straightforward filing that updates the state on your LLC's registered agent, principal office address, and member/manager information. It can be filed online through the Oregon Secretary of State's Business Registry.
Federal Taxes for Oregon LLC Owners
Beyond Oregon state taxes, LLC members must also satisfy federal tax obligations:
- Self-Employment Tax (15.3%): Covers Social Security (12.4% on earnings up to $176,100 in 2025) and Medicare (2.9% on all earnings). An additional 0.9% Medicare surtax applies to earnings above $200,000 for single filers.
- Federal Income Tax: Progressive rates from 10% to 37% based on total taxable income and filing status.
- Qualified Business Income (QBI) Deduction: Up to 20% deduction under IRC Section 199A for eligible business income, subject to income thresholds and SSTB limitations.
Oregon LLC Filing Deadlines
| Filing Type | Deadline | Extension |
|---|---|---|
| Single-Member LLC (Form 40) | April 15 | October 15 |
| Multi-Member LLC (Form 65) | March 15 | September 15 |
| S-Corp Election (Form 20-S) | March 15 | September 15 |
| Corporate Activity Tax | April 15 | October 15 |
| Annual Report | Formation anniversary | 60-day grace period |
| Estimated Tax Payments | Apr 15, Jun 15, Sep 15, Jan 15 | No extension |
Estimated Tax Payments in Oregon
Oregon requires estimated tax payments from individuals who expect to owe $1,000 or more in Oregon income tax after withholding and credits. Quarterly payments are due April 15, June 15, September 15, and January 15. Use Oregon Form 40-ESV to make estimated payments.
To avoid underpayment penalties, pay at least 90% of the current year's tax liability or 100% of the prior year's liability (110% if prior year AGI exceeded $150,000) through estimated payments and withholding.
Oregon LLC Formation Costs
- Articles of Organization: $100 filing fee with the Oregon Secretary of State
- Registered Agent: Required; must have an Oregon physical address. Commercial service: $50-$150/year
- Operating Agreement: Not legally required but recommended. Cost: $0-$500
- EIN (Federal Tax ID): Free from the IRS
- Annual Report: $100/year ongoing
- Business Licenses: Varies by city -- Portland, for example, requires a City Business License ($100/year for most businesses)
Oregon vs. Neighboring States for LLC Taxes
| State | Income Tax Rate | Annual Fee | Sales Tax |
|---|---|---|---|
| Oregon | 4.75-9.9% | $100 | None |
| Washington | 0% (no income tax) | $60 | 6.5% + local |
| California | 1-13.3% | $800 minimum | 7.25% + local |
| Idaho | 5.695% flat | $0 | 6% |
| Nevada | 0% (no income tax) | $150 | 6.85% + local |
Oregon's combination of no sales tax but high income tax makes it most favorable for businesses with high revenue but modest profits (where the income tax bite is smaller but the sales tax savings are substantial). Service businesses, in particular, often benefit from Oregon's no-sales-tax environment.
Pass-Through Entity Tax Election (PTET)
Oregon offers a Pass-Through Entity Tax (PTET) election that allows LLCs and other pass-through entities to pay state income tax at the entity level. This was enacted as a workaround to the federal $10,000 SALT deduction cap. When an LLC makes this election, the entity pays Oregon income tax directly, and members receive a corresponding credit on their individual returns.
The PTET election can produce significant federal tax savings for LLC members whose combined state and local taxes exceed $10,000. The election must be made annually and is irrevocable for the tax year once made. Oregon's PTET is calculated at the same progressive rates that would apply to the members individually.
Oregon Business Tax Credits and Incentives
- Oregon Investment Advantage: Income tax exemption for businesses locating in certain rural or economically distressed areas
- Strategic Investment Program (SIP): Property tax exemption for large capital investments ($25M+)
- Enterprise Zone Program: 3-5 year property tax exemption for businesses investing in designated zones
- Research and Development Tax Credit: Up to 5% of qualified research expenses (Oregon-specific calculation)
- Opportunity Grants: For businesses creating new jobs in rural Oregon
- Film & Video Tax Credit: Up to 10% on qualifying production costs
Common Oregon LLC Tax Mistakes
- Ignoring the $150 minimum tax: Even if your LLC loses money, you still owe $150 if you have Oregon-source income or conduct business in the state.
- Overlooking the Corporate Activity Tax: Many LLC owners are unaware of the CAT, especially if their gross receipts approach $750,000. Registration is required at that threshold.
- Multi-state sales tax compliance: Just because Oregon has no sales tax does not mean your LLC is exempt from collecting sales tax on sales to customers in other states with economic nexus laws.
- Underestimating the 9.9% top rate: With the top bracket starting at just $125,000 for single filers, Oregon's effective rate can be surprisingly high for moderately profitable LLCs.
- Missing the PTET election: If you itemize deductions federally and pay significant Oregon income tax, the PTET election could save you thousands. Don't overlook it.
- Portland-area local taxes: Multnomah County and Metro Portland impose additional local taxes (including a supportive housing services tax and a preschool-for-all tax) that affect high-income LLC members.
Oregon LLC Tax Deductions
Oregon uses federal taxable income as the starting point for calculating state taxable income, which means most federal business deductions carry through. Key deductions include:
- Standard Deduction: Oregon allows a standard deduction of $2,745 for single filers and $4,620 for joint filers (2025 amounts -- updated annually)
- Federal Tax Deduction: Oregon is one of the few states that allows a deduction for federal income taxes paid (limited to $7,050 for single filers, $14,100 for joint filers)
- Business Expenses: All ordinary and necessary business expenses deductible at the federal level flow through to Oregon
- Retirement Contributions: SEP-IRA, Solo 401(k), and SIMPLE IRA contributions reduce both federal and Oregon taxable income
- Health Insurance Premiums: Self-employed health insurance premiums are deductible above-the-line
Oregon's Federal Tax Deduction: Oregon uniquely allows you to deduct a portion of your federal income taxes paid from your Oregon taxable income. For 2025, the limit is approximately $7,050 for single filers and $14,100 for joint filers. This partially offsets Oregon's high rates and is a deduction most taxpayers miss.
S-Corp Election for Oregon LLCs
Given Oregon's high top rate of 9.9%, the S-Corporation election can be particularly valuable for Oregon LLC owners. By electing S-Corp status, you can split your LLC income between a reasonable W-2 salary (subject to self-employment tax) and distributions (not subject to SE tax). This can save $5,000-$15,000+ per year for profitable LLCs.
However, the S-Corp election adds complexity: you must run payroll, file additional tax forms (Oregon Form 20-S), and pay yourself a "reasonable salary." Use our S-Corp Tax Calculator to model whether the savings justify the added compliance cost.