1. (1) Definitions.

   1. (a) Retirement Income. Retirement income includes distributions from any:

      1. (A) U.S. Government pension;
      2. (B) State public pension;
      3. (C) Employee pension benefit plan;
      4. (D) IRA or KEOGH;
      5. (E) Deferred compensation plan;
      6. (F) Employee annuity plan which is included in federal taxable income.

   2. (b) Age. If taxpayers are married filing a joint return, the spouse receiving the pension income must meet the age requirement in order to claim the tax credit. In order to claim the credit, the taxpayer must meet the following age requirement before the end of the tax year:

      1. (A) The individual must be 58 years old for tax years beginning on or after January 1, 1991, and prior to January 1, 1993.
      2. (B) The individual must be 59 years old for tax years beginning on or after January 1, 1993, and prior to January 1, 1995.
      3. (C) The individual must be 60 years old for tax years beginning on or after January 1, 1995, and prior to January 1, 1997.
      4. (D) The individual must be 61 years old for tax years beginning on or after January 1, 1997, and prior to January 1, 1999.
      5. (E) The individual must be 62 years old for tax years beginning on or after January 1, 1999.
   3. (c) Base. The base is equal to $7,500 if the taxpayer files as single, head of household, qualifying widower, or married filing a separate return. The base is equal to $15,000 if the taxpayer is married filing a joint return.
   4. (d) Social Security. Social Security is the taxable and nontaxable benefits received by the individual who is receiving retirement income. In the case of a married filing joint return, social security is the taxable and nontaxable benefits received by both spouses.
   5. (e) For purposes of this credit, household income is the total income of the taxpayer and the taxpayer’s spouse, regardless of which spouse received the income or of the source. Household income does not include any taxable or nontaxable Social Security benefits received by either the taxpayer or the taxpayer’s spouse.

2. (2) Credit. Eligible individuals receiving retirement pay are allowed a credit for tax years beginning on or after January 1, 1991. The credit is equal to nine (9) percent of the lesser of:

   1. (a) Retirement income or;
   2. (b) The base, reduced by any Social Security received and by the household income limitation.

3. (3) Household Income Limitation. If a taxpayer filing a joint return has more than $30,000 of household income, the base is reduced dollar for dollar by the amount that the taxpayer’s household income exceeds $30,000. If a taxpayer files as single, head of household, qualifying widower, or married filing a separate return and has more than $15,000 in household income, the base will be reduced by household income in excess of $15,000. For purposes of this credit, benefits received from Social Security or Railroad Retirement are not included in computing the household income limitation.

   Example 1: John’s retirement income totals $6,000. John’s wife, Mary, has retirement income totaling $2,000. John and Mary file a joint return. John and Mary’s total retirement income is $8,000 ($2,000 + $6,000) and is all taxable on their Oregon return. They receive Social Security benefits which total $4,000 for the year. Their household income equals $31,000 not including Social Security. The base of $15,000 is reduced by $4,000 (Social Security benefits) and by $1,000 (the excess household income over $30,000). This equals $10,000 ($15,000 – $4,000 – $1,000). The credit is equal to nine (9) percent of the lesser of $10,000 or $8,000 (the total of their retirement income). John and Mary’s retirement credit is $720 (.09 x $8,000).

4. (4) Part-year Resident. The credit is calculated in the same manner as the credit allowed a resident in section (2) but is based only on retirement income that is taxable by Oregon.

   Example 2: Use the facts in Example 1 except assume that John and Mary are filing as part-year residents. Assume that of John’s $6,000 of retirement income, $1,500 is retirement from services performed in California and is all received before they move to Oregon. Also assume that $2,000 is compensation sourced to Oregon but received before they move to Oregon. The balance, $2,500 [$6,000 – ($1,500 + $2,000)], is compensation received after they moved to Oregon. Mary’s $2,000 of retirement income is all received after they move to Oregon and is all taxable by Oregon. The base of $15,000 is reduced by $4,000 (Social Security benefits) and by $1,000 (the excess household income over $30,000). The product of the formula is $10,000 ($15,000 – $4,000 – $1,000). The credit is equal to nine (9) percent of the lesser of $10,000 or $4,500 (retirement income taxable by Oregon). John and Mary’s retirement credit is $405 (.09 x $4,500).

5. (5) Nonresident. Retirement income received after December 31, 1995 by a nonresident is not includible in Oregon taxable income and may not be used to claim the retirement income credit.
6. (6) In no event will a taxpayer be allowed the credit in excess of the taxpayer’s tax liability or be allowed to carry any excess over to the following tax year.
7. (7) The provisions of this rule apply to retirement income received after December 31, 1995. Prior to January 1, 1996, the retirement income credit was based on retirement income included in federal taxable income.

Statutory/Other Authority

ORS 305.100

Statutes/Other Implemented

ORS 316.157

History

REV 72-2017, amend filed 12/22/2017, effective 01/01/2018
Renumbered from 150-316.157, REV 61-2016, f. 8-15-16, cert. ef. 9-1-16
RD 5-1997, f. 12-12-97, cert. ef. 12-31-97
RD 7-1991, f. 12-30-91, cert. ef. 12-31-91