Updated October 5, 2026. Quick answer: Yes, with a limited credit. Oregon taxes annuity income at graduated rates up to 9.9%. Age 62 or older, a filer may claim a credit of “nine percent of net pension income”, and net pension income is capped at $7,500 for a single filer ($15,000 joint), reduced by Social Security and by household income over $15,000 (joint: $30,000).
More state retirement-income schedules, line by line: Oregon federal pension subtraction.
How Oregon treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule; an age-62 credit on net pension income |
| 2025 rates (single) | “your tax is $4,065 plus 8.75% of excess over $50,000” up to $125,000, then “your tax is $10,627 plus 9.9% of excess over $125,000” |
| Credit | Eligible individual must have “attained 62 years of age before the close of the taxable year” |
| What counts as pension income | Distributions from employer plans under IRC 401, public retirement systems, IRC 403(a) or (b) employee annuities and individual retirement annuities under IRC 408; the statute names no contract bought outside a retirement plan |
A $24,000 example
A single filer 62 or older with $15,000 of household income, all of it pension income and no Social Security, has net pension income of $7,500 and a credit computed as 9% x $7,500 = $675.
A single filer whose household income is the $24,000 of annuity payments is $24,000 minus $15,000 = $9,000 over the household-income line, which is more than the $7,500 cap, so net pension income is $0 and the credit is $0.
What changes in 2026
The latest documents read print no 2026 change to the way annuity income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether Oregon taxes pensions, how Oregon taxes retirement income, state tax on 401(k) and IRA withdrawals, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- 2025 Oregon Individual Income Tax Instructions, Form OR-40 (Oregon Department of Revenue): https://www.oregon.gov/dor/forms/FormsPubs/form-or-40-inst_101-040-1_2025.pdf
- Oregon Revised Statutes Chapter 316 (Oregon Legislature): https://www.oregonlegislature.gov/bills_laws/ors/ors316.html
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.