Updated October 21, 2026. Quick answer: Oregon lets some retirees subtract federal pension income from Oregon income, and the subtraction is reported with code 307 in Section B of Schedule OR-ASC. Publication OR-17 explains who qualifies and how the percentage is worked out. The Section B total goes to Form OR-40, and a separate retirement income credit is described in the same publication.
What this form does
Oregon’s Form OR-40 has no pension line of its own. Schedule OR-ASC is the schedule that carries these items: “Use this schedule to report additions, subtractions, tax recaptures, standard credits, carryforward credits, and refundable credits that aren’t included on Form OR-40.” It adds “Include this schedule when you file Form OR-40.”
For the pension itself, Publication OR-17 says “You may be able to subtract some or all of your taxable federal pension included in federal income.” Oregon retirement taxes and whether Oregon taxes pensions give the state-level picture.
Who it applies to
Publication OR-17 describes the payments this way: “This includes benefits paid to the retiree or the beneficiary.” It also says “It doesn’t include disability payments if you haven’t attained the minimum retirement age.” Part-year and nonresident filers have their own rule: “Claim a subtraction for federal pension income only if you reported it on your Oregon return.”
The subtraction depends on service dates. The publication gives three cases, starting with “If all of your months of federal service occurred or points were earned before October 1, 1991, subtract 100 percent of the taxable federal pension income you reported on your federal return.” The second is “If you have no months of service or points earned before October 1, 1991, you can’t subtract any federal pension.” The third is “If your service occurred or points were earned both before and after October 1, 1991, you will subtract a percentage of the taxable federal pension income you reported on your federal return.”
The Thrift Savings Plan has its own paragraph: “Once a taxpayer is a retiree, withdrawals from federal TSP accounts are eligible for the subtraction based on dates of service.” For the account-type question, see Oregon TSP withdrawals. Military pensions are covered in Oregon military retirement.
The separate retirement income credit has its own test: “If you were age 62 or older at the end of the year, and receive taxable retirement income, you may qualify for this credit.”
The lines, one by one
| Line | What the form says |
|---|---|
| Schedule purpose | “Use this schedule to report additions, subtractions, tax recaptures, standard credits, carryforward credits, and refundable credits that aren’t included on Form OR-40.” |
| Section B | “Section B: Subtractions”. Instructions: “Enter the code and the amount of each subtraction in Section B.” |
| Code 307 | “Federal pension income” is listed in Publication OR-CODES with subtraction code 307, and Publication OR-17 labels it “[Subtraction code 307]” |
| Code requirement | “Use each code only once.” |
| Worksheet line 1 | “Federal pension income included in federal AGI.” |
| Worksheet line 3 | “Multiply line 1 by the decimal on line 2. This is your federal pension subtraction.” |
| Line B7 | “Total subtractions. Add lines B2, B4, and B6.” “Enter on Form OR-40, line 13” |
| Credit, code 811 | “Retirement income (ORS 316.157)” “[Credit code 811]” |
| Credit worksheet line 3 | “Net Oregon taxable pension. Line 1 minus line 2.” Line 2 of that worksheet reads “Enter any federal pension income subtracted from Oregon income.” |
| Credit worksheet line 11 | “Enter the smaller of line 3 or line 10.” |
| Credit worksheet line 12 | “Multiply line 11 by 9% (0.09). This is your credit.” |
The schedule’s instructions add a limit that applies to every subtraction: “You can only subtract amounts that are included in your Oregon income.” The percentage worksheet in Publication OR-17 has a months or points grid, which is printed in the publication and is not read on this page.
The figures the form prints
The percentage rule sits in one sentence: “To determine your percentage, divide your months of service or points earned before October 1, 1991, by your total months of service or points earned.” It continues “Once you determine the percentage, it will remain the same from year to year.”
For the retirement income credit, the household income test reads “Your household income is less than $22,500 ($45,000 if married filing jointly); and” The benefits test reads “Your Social Security and/or Tier 1 Railroad Retirement Board (RRB) benefits are less than $7,500 ($15,000 if married filing jointly), and” The credit worksheet’s last line is the one quoted in the table, “Multiply line 11 by 9% (0.09). This is your credit.”.
Where the result goes next
Section B closes with “Total subtractions. Add lines B2, B4, and B6.” and “Enter on Form OR-40, line 13”. The Form OR-40 instructions repeat it: “Enter the total from Schedule OR-ASC, line B7.” and “Include the schedule with your return.”
A credit takes a different path. The schedule’s Section D total reads “Total standard credits. Add lines D3, D6, D9, D12, and D15.” and “Enter on Form OR-40, line 27”. Publication OR-CODES lists the retirement income credit among the items headed “Schedule OR-ASC, Section D or OR-ASC-NP , Section G.”
Your payers’ figures come from Form 1099-R; see 1099-R boxes explained, Form 1040 line 5a and 5b and Form 1040 line 4a and 4b for how the federal return reports the same payments. For how Oregon treats Oregon 401(k) and IRA withdrawals, see that page.
A worked example
Publication OR-17 states the subtraction as a share of months. This is an illustration, not a state example, with invented numbers: a retiree with 120 months of federal service before the cutoff date and 240 months in total, and a taxable federal pension of $40,000 on the federal return.
The percentage is 120 divided by 240, which is 0.500 (computed). The subtraction is 0.500 times $40,000 and comes to $20,000 (computed). The decimal is rounded to three places, as the worksheet says: “Round the decimal three places and enter it here.”
These amounts are invented for the computation; your own months, points and pension depend on your service record.
Edition and line numbers
This page reads the 2025 Publication OR-17 (Rev. 01-29-26), the 2025 Schedule OR-ASC (Rev. 07-29-25), the 2025 Schedule OR-ASC and OR-ASC-NP Instructions (Rev. 10-07-25), Publication OR-CODES (Rev. 10-07-25) and the 2025 Form OR-40 Instructions (Rev. 01-29-26) for tax year 2025, the current file Oregon Department of Revenue served on 2026-10-21. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Treating a TSP rollover as still eligible. Publication OR-17 says “If the taxpayer moves money from a TSP to another type of account, the account loses its character and is no longer a federal pension.”
- Subtracting a pension with no service before the cutoff date. The publication says “If you have no months of service or points earned before October 1, 1991, you can’t subtract any federal pension.”
- Subtracting an amount that Oregon never counted. The instructions say “You can only subtract amounts that are included in your Oregon income.”
Related: Oregon retirement taxes, whether Oregon taxes pensions, Oregon TSP withdrawals, Oregon military retirement, and Form 1040 line 5a and 5b.
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- 2025 Schedule OR-ASC, Oregon Additions, Subtractions and Adjustments (Rev. 07-29-25), Oregon Department of Revenue: www.oregon.gov
- 2025 Schedule OR-ASC and OR-ASC-NP Instructions (Rev. 10-07-25), Oregon Department of Revenue: www.oregon.gov
- Publication OR-CODES, Oregon Subtraction and Addition Codes (Rev. 10-07-25), Oregon Department of Revenue: www.oregon.gov
- 2025 Publication OR-17, Oregon Individual Income Tax Guide (Rev. 01-29-26), Oregon Department of Revenue: www.oregon.gov
- 2025 Form OR-40 Instructions (Rev. 01-29-26), Oregon Department of Revenue: www.oregon.gov
Read from the state revenue documents linked above on October 21, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.