The Oregon estate tax exemption for 2024 is $1 million.
Oregon imposes its own estate tax, which is separate from the federal estate tax. Unlike the federal exemption, Oregon's exemption amount is a fixed figure and is not indexed for inflation. This means that estates with a gross value exceeding $1 million at the time of the decedent's death may be subject to Oregon estate tax.
Understanding Oregon Estate Tax vs. Federal Estate Tax
It's crucial to distinguish between the state-level Oregon estate tax and the federal estate tax, as they operate independently and have vastly different exemption thresholds. Many taxpayers are familiar with the higher federal lifetime estate tax exemption, which is significantly larger and adjusts for inflation.
Key Differences in Exemptions
Here's a comparison of the estate tax exemptions for 2024:
| Tax Type | Exemption Amount (2024) | Notes |
|---|---|---|
| Oregon Estate Tax | $1 million | This is the threshold for estates subject to Oregon's estate tax. The tax is progressive, with rates ranging from 10% to 16% on the portion of the estate that exceeds the $1 million exemption. This exemption amount is fixed and not adjusted for inflation. |
| Federal Estate Tax | $13.61 million | This high lifetime exemption is indexed to inflation, meaning it increases annually. However, this substantial federal exemption is currently scheduled to be reduced significantly. Starting in 2026, it is projected to be cut by approximately half, with current estimates suggesting it will be around $7 million. |
Who is Affected by Oregon's Estate Tax?
Because Oregon's estate tax exemption is relatively low compared to the federal exemption, a broader range of estates may be subject to state-level taxation. This particularly impacts:
- Middle-Class Estates: Even modest homes and retirement accounts can push an estate's value over the $1 million threshold in Oregon, affecting families who might not consider themselves "wealthy."
- Farmers and Ranchers: Land values, livestock, and equipment can quickly accumulate to exceed the $1 million exemption, potentially creating liquidity challenges for heirs needing to pay the estate tax.
- Small Business Owners: The value of a family-owned business might trigger the Oregon estate tax, leading to difficult decisions about selling assets to cover tax liabilities.
Planning for Oregon Estate Tax
Given the $1 million exemption, Oregon residents should consider proactive estate planning strategies to minimize potential tax liabilities. These may include:
- Gifting Strategies: Utilizing annual gift tax exclusions to reduce the taxable estate during one's lifetime.
- Trusts: Establishing various types of trusts (e.g., irrevocable trusts, bypass trusts) to remove assets from the taxable estate.
- Life Insurance: Using life insurance policies to provide liquidity for heirs to pay estate taxes without needing to sell inherited assets.
- Qualified Terminable Interest Property (QTIP) Trusts: For married couples, these can defer estate taxes until the death of the second spouse.
- Valuation Discounts: For certain assets like interests in family businesses or real estate, appropriate valuation can reduce the taxable value.
Consulting with an experienced estate planning attorney and financial advisor is highly recommended to develop a tailored strategy that addresses both federal and Oregon estate tax considerations.
