Is My Military Income Taxable to Oregon?

Whether your military pay is taxable to Oregon depends on your residency status, where you're stationed, and the address listed in your Defense Finance and Accounting Service (DFAS) payroll records. Oregon has special rules for active-duty service members, military spouses, National Guard members, and reservists.

According to the Oregon Department of Revenue, active-duty military personnel are generally treated as Oregon nonresidents if their DFAS payroll address is outside Oregon, regardless of where they are domiciled. 

Oregon Resident Stationed Outside Oregon

You may be treated as a nonresident of Oregon for tax purposes if all of the following apply:

• You didn't maintain a permanent home in Oregon for yourself or your family during the tax year.
• Your permanent address was outside Oregon for the entire year.
• You spent 30 days or less in Oregon during the tax year. 

If you're treated as a military nonresident, Oregon generally won't tax your active-duty military pay. 

How to Enter the Military Income Adjustment

1. Go to State.
2. Select the three dots to edit your Oregon nonresident return.
3. Select Basic Information.
4. Select Special Processing Instructions.
5. Choose Military Nonresident from the drop-down menu.
6. Answer Yes to the military question.
7. Continue to Income Subject to Tax.
8. Enter the amount of active-duty military pay that should be removed from Oregon taxable income.
9. Continue through the return.

Oregon Resident Stationed in Oregon

If you're an Oregon resident stationed in Oregon, your military pay is generally taxable by Oregon. File Oregon Form OR-40 as a resident return. 

Nonresident Stationed in Oregon

If you're not an Oregon resident but are stationed in Oregon on active duty, your military pay generally isn't taxable by Oregon. File Oregon Form OR-40-N if you need to file an Oregon return. 

How to Enter the Military Pay Subtraction

1. Go to State.
2. Select the three dots to edit your Oregon nonresident return.
3. Select Subtractions From Income.
4. Select Other Subtraction.
5. Choose Military Pay from the drop-down menu.
6. Enter the military pay amount in both fields (unless you're filing a part-year Oregon return).
7. Continue.

When Spouses Have Different Residency Status

If one spouse is an Oregon resident and the other is not, Oregon generally requires a joint nonresident return. Use the residency information for each spouse to determine how income should be reported and taxed.

Additional Military Pay Deduction for Oregon Residents

After applying any applicable military pay exclusions or nonresident adjustments, certain Oregon resident active-duty service members may qualify for an additional subtraction of up to $6,000 per qualifying military spouse. 

How to Enter the Additional Military Pay Subtraction

1. Go to State.
2. Select the three dots to edit your Oregon return.
3. Select Subtractions From Income.
4. Select an available Other Subtraction entry.
5. Choose Military Pay from the drop-down menu.
6. Enter the deductible amount in both boxes (unless filing a part-year return).
7. Continue.

National Guard Members and Reservists

Members of the National Guard and military reserves who are called to active duty outside Oregon for 21 days or more may be able to subtract the military pay earned during that qualifying service period. 

How to Enter the National Guard or Reserve Military Pay Subtraction

1. Go to State.
2. Select the three dots to edit your Oregon resident return.
3. Select Subtractions From Income.
4. Select Other Subtraction.
5. Choose Military Pay from the drop-down menu.
6. Enter the qualifying military pay amount.
7. Continue.