Does Oregon Tax VA Disability Income? Navigating Veteran Benefits

Does Oregon Tax Va Disability Income? Understanding the tax implications of your Veterans Affairs (VA) disability income in Oregon is crucial for financial planning. This comprehensive guide, brought to you by income-partners.net, clarifies Oregon’s tax policies concerning VA disability benefits and offers insights into maximizing your financial well-being. Let’s explore the details of tax-free benefits, property tax exemptions, and other financial resources available to veterans in Oregon.

1. What Oregon Military and Veterans State Tax Benefits are Available?

Oregon provides several state tax benefits for military members and veterans, including exemptions for certain types of military pay, retirement pay, and disability income. Let’s dive into each category to clarify the specifics.

1.1. Is Oregon Military Retired Pay Income Taxed?

Oregon allows retired service members to subtract military retired pay earned for service before October 1, 1991, from their Oregon income taxes. However, any military retired pay earned on or after October 1, 1991, is not eligible for this subtraction. If a service member’s career includes months both before and after October 1, 1991, they can subtract a percentage of their pension income. The percentage is calculated by dividing the months of service before October 1, 1991, by the total months of service, rounded to three decimal places (e.g., 0.4576 = 45.8%).

Once a service member retires, withdrawals from their Thrift Savings Plan (TSP) account are eligible for the subtraction based on their dates of service. Withdrawals before retirement do not qualify. If the taxpayer transfers money from a TSP to another type of account, the account is no longer considered a federal pension, and future withdrawals are not eligible for the subtraction. For more detailed information, you can contact the Oregon Department of Revenue.

1.2. What Military Pay Adjusted Gross Income (AGI) Subtractions are Offered in Oregon?

Oregon offers several AGI subtractions for military pay received by resident service members:

Military pay earned by resident service members stationed outside Oregon is not taxed.
Military pay earned by National Guard and U.S. Armed Forces Reserve service members assigned away from home for 21 days or more is not taxed.
Military pay earned by an Oregon National Guard service member serving on state active duty is not taxed.
Any remaining taxable military income after the above subtractions is eligible for up to a $6,000 subtraction.

It is worth noting that military pay or allowances not included in federal AGI are not taxed by Oregon.

1.3. What is the Extension Policy for Filing Oregon State Income Tax for Service Members?

Oregon offers the same six-month extension for filing and paying state income taxes to service members (and their spouses when filing jointly) who are serving in a designated combat zone or hazardous duty area, aligning with IRS guidelines. Service members are allowed a 180-day extension from the date they redeploy from the combat zone or qualified hazardous duty area, or from when they are released from hospitalization due to injuries or illness sustained in the qualifying area. Further details can be found in the IRS Combat Zones Approved for Tax Filing Extension.

1.4. What About the Oregon Nonresident Military Spouse Tax Exemption?

Nonresident military spouses are exempt from paying Oregon income taxes on wages earned in Oregon, provided they meet specific criteria:

The service member is in Oregon to comply with military orders.
Both the military spouse and the service member are residents of another state or territory.
The military spouse must still file income taxes in their state or territory of residence, if required.

1.5. Does Oregon Tax Military Disability Retirement Pay?

No, Oregon does not tax military disability retirement pay received as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in the U.S. Armed Forces.

Some payments considered disability benefits include:

Disability compensation and pension payments for disabilities paid to veterans or their families.
Grants for homes designed for wheelchair living.
Grants for motor vehicles for veterans who lost their sight or the use of limbs.
Benefits under a dependent-care assistance program.

For further details, refer to IRS Publication 525.

1.6. What are Oregon State Taxes on U.S. Department of Veterans Affairs Disability Dependency and Indemnity Compensation (DIC)?

DIC is a tax-free monetary benefit paid to eligible survivors of service members who died in the line of duty or survivors of veterans whose death resulted from a service-connected injury or disease. You can find more information on the VA website.

1.7. Are Military Survivor Benefit Plan (SBP), Reserve Component Survivor Benefit Plan (RCSBP), and Retired Serviceman’s Family Protection Plan (RSFPP) Annuities Taxed in Oregon?

The surviving spouse of a deceased service member can subtract SBP, RCSBP, and RSFPP annuities for service before October 1, 1991, from their Oregon income taxes. Annuities received for service after October 1, 1991, are not eligible for this subtraction. If the service included months before and after October 1, 1991, surviving spouses can subtract a percentage of their pension income, determined by dividing the months of service before October 1, 1991, by the total months of service, rounded to three decimal places (e.g., 0.4576 = 45.8%). For more information, contact the Oregon Department of Revenue.

1.8. What Disabled Veteran or Surviving Spouse Oregon Homestead Property Tax Exemptions are Available?

Oregon offers property tax exemptions of $25,537 or $30,646 for disabled veterans and their surviving spouses on their homestead’s assessed value for property taxes. To be eligible, veterans and their surviving spouses (or registered domestic partners) must own and live at the homestead property. This exemption is first applied to the home and then to taxable personal property.

Who is eligible for the Disabled Veteran or Surviving Spouse Oregon Homestead Property Tax Exemptions?

To be eligible, veterans must be U.S. citizens who served in the U.S. Armed Forces and were discharged or released under honorable conditions, and meet one of the following requirements:

Served at least 91 consecutive days beginning on or before January 31, 1955.
Served at least 179 consecutive days beginning after January 31, 1955.
Served less than 179 days and was discharged or released from active duty because of a service-connected disability.
Served for 178 days or less and has a disability rating from the VA.
Served at least one day in a combat zone.
Received a combat or campaign ribbon, or expeditionary medal.
Receiving a nonservice-connected pension from the VA.

Veterans must also meet one of the following requirements to be eligible for the $25,537 exemption:

Have a 40% or more disability rating from the VA.
Served in the U.S. Armed Forces and is certified each year by a licensed physician as being 40% or more disabled; these veterans’ total gross income cannot be more than 185% of the annual Federal Poverty Level Guidelines.
Be the unremarried surviving spouse (or registered domestic partner) of an eligible deceased veteran.

To qualify for a $30,646 exemption, veterans must meet one of the following requirements:

Have a 40% or more service-connected disability rating from the VA or a branch of the U.S. Armed Forces.
Be the unremarried surviving spouse (or registered domestic partner) of a veteran who died due to a service-connected injury or illness, or the veteran received at least one year of the maximum exemption allowed.

Applications must be filed with the local county assessor on or before April 1 to claim a property tax exemption for the following tax year, which begins July 1. Applications must be filed within 30 days for properties acquired after March 1 but before July 1. For more information, call 503-378-4988 or 800-356-4222, or email [email protected]. You can find the Oregon Property Tax Assessor Directory online and the Oregon Veteran or Surviving Spouse Exemption Claim Form.

1.9. What Oregon Reserve Component Active Duty Service Property Tax Exemption is Available?

Oregon offers a property tax exemption on a portion of the assessed value of the homes of Oregon National Guard service members and U.S. Armed Forces Reserve service members who are called to federal active duty service. Service members can claim the exemption for each tax year during which they served at least one day of qualified service. The exemption amount began at $60,000 of assessed value in 2005 and increases by 3% each year. To be eligible, service members must be Oregon residents, be members of the National Guard or U.S. Armed Forces Reserve, own and live at the property, and be ordered to federal active duty service for 179 days or more.

Applications must be filed with the local county assessor on or before August 1 following the end of the tax year. For more information, call 503-378-4988 or 800-356-4222, or email [email protected]. You can find the Oregon Property Tax Assessor Directory online and the Oregon Active Duty Military Service Member’s Exemption Claim Form.

1.10. Are Oregon Social Security Benefits Taxed?

No, Oregon does not tax Social Security benefits. More information can be found on the Oregon Department of Revenue website.

2. What are My Oregon Military and Veterans Education Benefits?

Oregon provides extensive educational benefits to military members, veterans, and their families. These benefits include tuition assistance, resident tuition rates, and specific programs for dependents. Let’s explore these opportunities in detail.

2.1. What is the Oregon National Guard State Tuition Assistance (ONGSTA)?

ONGSTA provides tuition assistance at Oregon postsecondary institutions for Oregon National Guard service members. ONGSTA covers in-state resident tuition rates for up to 90 credits at Oregon community colleges and up to 180 quarter credits / 120 semester credits at eligible Oregon universities and colleges. Additionally, ONGSTA offers a book allowance of up to $1,000 per academic year and pays certain fees up to:

Oregon Community Colleges: $407 per term
Oregon Public Universities (including OHSU): $776 per term
Eligible Oregon Private Colleges: $783 per semester term, $521 per quarter term

ONGSTA awards are granted on a first-come, first-served basis until funds are exhausted. All VA education benefits and federal tuition assistance can be used concurrently with ONGSTA.

Who is eligible for ONGSTA?

To be eligible, service members must:

Have completed military basic training.
Be an Oregon National Guard service member in good standing, not subject to adverse actions.
Be currently drilling and attending all scheduled unit training assemblies and annual training periods.
Not possess a bachelor’s degree or higher.
Not be in default of any federal loans.
Maintain a cumulative GPA of 2.0 or higher and demonstrate satisfactory academic progress.

To apply, service members must complete the ONGSTA application in the Oregon Student Aid Portal (new users must create an account) and the Free Application for Federal Student Aid.

For more information, contact the Oregon Army National Guard Education Office at [email protected] or call 971-355-4281.

2.2. How Does Oregon Provide Resident Tuition and Fees for Nonresident Service Members and Their Families?

Nonresident service members serving in an active or reserve component of the U.S. Armed Forces, their spouses, and dependent children are considered Oregon residents for tuition purposes if they meet one of the following conditions:

Live in Oregon while assigned to a duty station in Oregon.
Were Oregon residents at the time they entered the U.S. Armed Forces, until they take steps to change their state of residence.
Are Oregon resident service members assigned outside of Oregon who return to Oregon within six months of their discharge.
Service members who continue to live in Oregon after separation from the U.S. Armed Forces may count their time spent in Oregon to meet residency requirements.

For complete residency guidelines, see “Residence Classification of Armed Forces Personnel” in the Oregon Residency Standards.

2.3. What Resident Tuition Rates are Available When Using U.S. Department of Veterans Affairs Educational Benefits or Fry Scholarship?

Veterans using VA educational benefits, students using transferred VA educational benefits, or the Marine Gunnery Sergeant John David Fry Scholarship, who live in Oregon while attending an Oregon institution of higher learning, are charged resident tuition rates, regardless of their state of residence. For more details, visit the University of Oregon’s page on veterans benefits.

2.4. What is the Oregon Veterans Dependent Tuition Program?

This program offers a full tuition waiver at an Oregon public university and the Oregon Health and Science University for a bachelor’s or master’s degree for the children and spouses of certain veterans. The waiver covers the total number of attempted credit hours equal to four years of full-time attendance for a bachelor’s degree or two years for a master’s degree.

Who is eligible for the Oregon Veterans Dependent Tuition Program?

For children or spouses to be eligible, the veteran must have received an Honorable or General, Under Honorable Conditions discharge and meet one of the following requirements:

Received a Purple Heart in 2001 or after (only children are eligible).
Died while serving on active duty.
Has a 100% service-connected disability rating from the VA or a branch of the U.S. Armed Forces, or died as a result of a service-connected disability.

Child or Spouse Eligibility:

Child, including adopted child or stepchild, 23 years old or less.
A child who is older than 23 years of age may be eligible for an age waiver for a master’s degree program if the child applies within 12 months of receiving a bachelor’s degree.
Spouse or unremarried surviving spouse of a veteran who meets eligibility requirements.

For more information, students should contact the admissions office at the university they plan to attend.

2.5. What is the Oregon Veterans Bridge Grant?

The Veteran Educational Bridge Grant, administered by the Oregon Department of Veterans’ Affairs (ODVA), provides up to $5,000 to help student veterans achieve their educational goals. Grants are intended to support veterans who cannot complete their VA-approved academic program on time due to unavailable required classes or student account debt preventing registration.

Who is eligible for the Oregon Veterans Bridge Grant?

Oregon resident veterans who served on active duty (other than for training) in the U.S. Armed Forces and received an honorable discharge must meet one of the following:

Served more than 90 consecutive days beginning on or before January 31, 1955, or
Served more than 178 consecutive days, or less than 178 days with a service-connected disability rating from the VA, or
Served at least one day in a combat zone, or
Received a combat or campaign ribbon, or an expeditionary medal for service in the U.S. Armed Forces, or
Receives a non-service-connected disability pension from the VA

Refer to Oregon Revised Statutes 408.225 for additional details.

For more information, call 503-400-0540. Applications and required documentation (listed on the application) can be submitted using the ODVA Secure Upload webpage. The ODVA Veteran Educational Bridge Grant Application is available online.

2.6. How Can Wartime Veterans Obtain an Oregon High School Diploma?

Oregon resident veterans who left high school before graduating to serve in the U.S. Armed Forces can request a high school diploma. Veterans can request a diploma from the school district where they live now or the school district they would have graduated from. Diplomas may be awarded posthumously.

Who is eligible for Oregon High School Diploma for Wartime Veterans?

Veterans who received an honorable discharge after service during:

World War I
World War II
Korean War
Vietnam War

Or, veterans who were physically present in:

Operation Urgent Fury (Grenada)
Operation Just Cause (Panama)
Operations Desert Shield or Desert Storm (Persian Gulf War)
Operation Restore Hope (Somalia)
Operation Enduring Freedom (Afghanistan)
Operation Iraqi Freedom (Iraq)

Or, veterans who served in an area designated as a combat zone by the President of the U.S.

Veterans should contact the school district where they live now or the school district they would have graduated from for more information and to apply. Oregon Revised Statutes 332.114 and the Oregon School Directory provide additional details.

2.7. What is the Interstate Compact on Educational Opportunity for Military Children (MIC3)?

This compact aims to remove educational barriers for military children due to frequent moves and deployments by:

Facilitating prompt enrollment of military children and ensuring they are not disadvantaged by difficulties in transferring educational records or variations in entrance requirements.
Facilitating the student placement process so that military children are not disadvantaged by attendance requirements, scheduling, grading, or course content.
Facilitating eligibility for enrollment, educational programs, and participation in extracurricular activities.
Ensuring the on-time graduation of military children.
Providing for uniform collection and sharing of information between member states, schools, and military families.
Promoting coordination between this compact and other compacts affecting military children.
Promoting flexibility and cooperation between the educational system, parents, and the student to achieve educational success.

For assistance, use the MIC3 Assistance Request.

3. What Oregon Military and Veterans Employment Benefits Can I Utilize?

Oregon offers robust employment benefits for veterans, including hiring preferences, assistance programs, and protections under federal law. These resources are designed to support veterans in their transition to civilian careers.

3.1. What is the Oregon Veterans’ Preference for State Employment?

Oregon law requires state employers to provide hiring preference to eligible veterans. Preference is also given to veterans who are state employees for promotion to civil service positions with higher maximum salaries. Applicants must meet the position requirements, pass initial screening, and pass any required examinations. Preference is given by adding points to a veteran’s score: five percentage points for veterans and 10 percentage points for disabled veterans.

For positions without a numerical scoring system, eligible veterans receive special consideration in the hiring decision. Public employers must interview every veteran who meets the minimum qualifications for the position. Veterans who are not hired can request the reason in writing.

Who is eligible for Oregon Veterans’ Preference for State Employment?

Veterans who served on active duty in the U.S. Armed Forces and received an honorable discharge must meet one of the following:

Served more than 90 consecutive days beginning on or before January 31, 1955, or
Served more than 178 consecutive days, or less than 178 days with a service-connected disability rating from the VA, or
Served at least one day in a combat zone, or
Received a combat or campaign ribbon or an expeditionary medal, or
Receives a non-service-connected disability pension from the VA

To qualify as a disabled veteran, applicants must meet one of the following:

Was discharged or released from active duty due to a service-connected injury or illness, or
Has a service-connected disability rating from the VA, or
Was awarded the Purple Heart

Refer to Oregon Revised Statutes 408.230 and Oregon Revised Statutes 408.225 for additional details.

3.2. What Federal Employment Veterans’ Hiring Preferences are Available?

Federal law entitles veterans who are disabled or served during specific periods or campaigns to preference over non-veterans in federal civil service hiring and retention. Veterans may receive 5 or 10 points added to their scores in examinations or interviews.

5-point Hiring Preference:

Five points are added to the examination score or rating of a veteran who served:

During a war, or
From April 28, 1952, through July 1, 1955, or
More than 180 consecutive days, other than for training, after January 31, 1955, and before October 15, 1976, or
During the Gulf War from August 2, 1990, through January 2, 1992, or
More than 180 consecutive days, other than for training, from September 11, 2001, to August 31, 2010, or
In a campaign or expedition for which a campaign medal has been authorized.

10-point Compensable Disability (CP) Preference:

Ten points are added to the examination score or rating of a veteran who served at any time and has a compensable service-connected disability rating of at least 10% but less than 30%.

10-Point 30% Compensable Disability Preference (CPS):

Ten points are added to the passing examination score or rating of a veteran who served at any time and has a compensable service-connected disability rating of 30% or more.

10-Point Disability Preference (XP):

Ten points are added to the passing examination score or rating of:

A veteran who served at any time and has a present service-connected disability or receives compensation, disability retirement benefits, or a pension from the military or the VA but does not qualify as a CP or CPS, or
A veteran who received a Purple Heart.

10-Point Derived Preference (XP):

Ten points are added to the passing examination score or rating of spouses, surviving spouses, or mothers of veterans.

3.3. What is the Uniformed Services Employment and Reemployment Rights Act (USERRA)?

USERRA protects the civilian job rights and benefits of veterans and members of reserve components. It establishes that reemployment protection does not depend on the timing, frequency, duration, or nature of an individual’s service, provided basic eligibility criteria are met. USERRA also provides protection for disabled veterans, requiring employers to make reasonable efforts to accommodate the disability.

Returning service members are reemployed in the job they would have attained had they not been absent for military service, with the same seniority, status, pay, and other rights and benefits. Employers must also make reasonable efforts (such as training or retraining) to enable returning service members to refresh or upgrade their skills.

Health and pension plan coverage for service members is also provided. Individuals performing military duty of more than 30 days may elect to continue employer-sponsored healthcare for up to 24 months, though they may be required to pay up to 102% of the full premium.

3.4. Do Oregon State Employees Get Paid Leave for Military Duty?

Oregon State employees who are serving in a reserve component of the U.S. Armed Forces are authorized 21 days of paid military leave each year for required military duty. This leave is without loss of time, pay, or regular leave, and without a negative effect on efficiency rating or other rights or benefits. Employees must have been employed by the state for six months or more and be service members serving in the National Guard or U.S. Armed Forces Reserves to be eligible.

3.5. What is the Oregon Military Family Leave Act (OMFLA)?

OMFLA requires Oregon businesses to provide 14 days of unpaid leave for employees who are the spouse or domestic partner of certain active and reserve component service members. Employers with 25 or more employees must grant leave to employees who work an average of at least 25 hours per week and are the spouse or domestic partner of a National Guard or U.S. Armed Forces Reserve service member who is called to active duty, or a service member serving on active duty who has been deployed.

3.6. How Does WorkSource Oregon (WSO) Provide Employment Assistance and Priority of Service for Eligible Veterans and Spouses?

WSO helps veterans, service members leaving the U.S. Armed Forces, and eligible spouses by providing employment training and placement services through Local Veteran Employment Representatives (LVERs) and Disabled Veteran Outreach Program (DVOP) Specialists. These specialists maintain up-to-date information about employment opportunities and services available at the federal, state, and local levels, as well as in the private sector. Eligible veterans and spouses may qualify for priority of service, meaning they receive access to services or resources earlier than those not eligible.

LVERs engage with local employers to help veterans find gainful employment through seminars and job search workshops.

DVOP Specialists work directly with veterans and spouses who have Significant Barriers to Employment (SBE) to provide enhanced services. WSO staff refer eligible job seekers to a DVOP Specialist for an eligibility assessment.

To be eligible for priority of service, the veteran or spouse must meet the following requirements:

Veteran who served on active duty in the U.S. Armed Forces and received a discharge or release under conditions other than dishonorable.
Spouse of one of the following:
- Veteran who died of a service-connected disability.
- Veteran who has a total service-connected disability.
- Veteran who died while a disability was in existence.
- Service member who died on active duty.
- Service member who is declared missing in action or a prisoner of war for 90 days or more.

For more information or assistance, contact a WSO Center.

3.7. How Can Military Experience Translate into Oregon Direct Professional Licensing?

Oregon professional licensing agencies and boards accept military training or experience as an allowable substitution for traditional civilian education or experience required for licensure, certification, or registration. Veterans should contact the licensing board for their career field for more information.

4. What Oregon Military and Veterans Unemployment Insurance Benefits are Offered?

Oregon provides unemployment insurance benefits to eligible workers, including veterans. This program offers temporary financial assistance while unemployed individuals seek new employment.

4.1. How Does Oregon Unemployment Insurance (UI) Work?

Oregon’s Employment Department administers the UI program, providing temporary financial assistance to unemployed Oregon workers. UI is a short-term replacement of lost wages while workers seek other employment and is not a permanent source of income. Benefits are not based on financial need.

Employers pay all costs of the UI program. The amount of benefits applicants may be eligible for is determined by the amount of work they performed and wages they earned during the 12 months prior to filing the claim.

To file a claim, UI applicants need:

Name, Social Security number, birthdate, and contact information.
If not a U.S. citizen or a Compact of Free Association Islander, applicants must provide a U.S. Citizenship and Immigration Services number, A-number, or I-94 number.
Complete work history for the past 18 months, including employer names, addresses, phone numbers, and start and end dates of employment.
Bank account and routing number if direct deposit is requested.

Applicants can file online using the Oregon Employment Department, Frances Online for Claimants webpage, by calling 877-345-3484, or by submitting an Oregon Employment Department, Initial Claim Form to:

Oregon Employment Department
875 Union Street NE, Room 201
Salem, Oregon 97311
Fax: 503-947-1668

The Oregon UI Claimant Handbook and Oregon How to Apply for UI Benefits Webpage provide more detailed information.

5. What Oregon Military and Veterans Driver and Motor Vehicle Services Benefits Can I Access?

Oregon offers several benefits through the Driver and Motor Vehicle Services (DMV) for veterans, including a veteran designation on driver licenses and specialized license plates.

5.1. How Can I Obtain a Veteran Designation on Oregon Driver Licenses and ID Cards?

Oregon DMV offers a veteran designation on driver licenses, instruction permits, or ID cards. There is no additional fee for the veteran designation, though original application, renewal, or replacement fees will apply.

Who is eligible for Veteran Designation on Oregon Driver Licenses and ID Cards?

Veterans must have served on active duty in the U.S. Armed Forces and received an honorable discharge, meeting one of the following:

Served more than 90 consecutive days beginning on or before January 31, 1955, or
Served more than 178 consecutive days, or less than 178 days with a service-connected disability rating from the VA, or
Served at least one day in a combat zone, or
Received a combat or campaign ribbon or an expeditionary medal, or
Receives a non-service-connected disability pension from the VA

Veterans can add the designation at any Oregon DMV Office. They must provide a copy of their DD214 or DD215 indicating they received an honorable discharge and meet all other Oregon requirements for a driving privilege or ID card.

5.2. What Oregon Military and Veteran License Plates are Available?

Oregon offers six distinctive license plates to honor the service and sacrifice of eligible service members, veterans, and certain family members. Specific eligibility and documentation requirements apply. A short description of some of these license plates is listed below:

Oregon Medal of Honor License Plate:

Medal of Honor recipients are eligible for this plate.

Oregon Disabled Veteran License Plate:

Disabled veterans who received an honorable discharge and have a service-connected disability rating from the VA are eligible for this plate. This plate does not grant special parking privileges. Only one set of plates may be issued per qualifying veteran.

Veterans must complete an Oregon Department of Transportation, Application for Disabled Veteran Plates and provide a copy of their DD214 or DD215 and a letter from the VA indicating they have a service-connected disability.

Oregon Veteran Recognition License Plate:

Honorably discharged veterans are eligible for this plate. Branch of service insignia or service-related decals are available.

Veterans must complete an Oregon Department of Transportation, Veteran Plate Certification and provide a copy of their DD21