Oregon Capital Gains Tax on Real Estate

By Skyline Capital Investments · Updated October 26, 2026 · 7 min read

Does Oregon have a capital gains tax?

Oregon capital gains tax on real estate is simply the state personal income tax applied to your gain, because Oregon has no preferential rate for long-term gains. A building you held for 20 years is taxed at the same 4.75% to 9.9% rates as wages or rent.

That makes Oregon one of the more expensive states to sell in. Federal law gives long-term gains rates of 0%, 15% or 20%, but Oregon starts from your federal income and taxes the gain in full at its own brackets. The top bracket begins at $125,000 of Oregon taxable income for a single filer and $250,000 for a joint return, so on a building sale nearly every dollar of gain is taxed at 9.9%.

Oregon income tax brackets for 2026

Oregon has four brackets, and the 2026 thresholds below come from the Oregon Department of Revenue’s 2026 withholding tax formulas (publication 150-206-436).

• Short-term and long-term gains are taxed the same way in Oregon. The one-year holding period matters only for your federal return.
• There is a reduced Oregon rate for net long-term gain on the sale of farm assets in a farm liquidation (Schedule OR-FCG). It does not cover apartment buildings or other rental property.
• Confirm the final 2026 figures against the 2026 Form OR-40 tax rate charts when the department releases them.

How Oregon and federal capital gains tax stack

The two taxes are calculated separately and added together, so an Oregon seller pays the federal rate on the gain plus Oregon’s rate on the same gain. Federal long-term gain is taxed at 0%, 15% or 20% depending on where it falls on top of your other taxable income, and Revenue Procedure 2025-32 sets the 2026 line where 20% begins at $613,700 for a joint return and $545,500 for a single filer.

Gain equal to the depreciation you claimed on the building is unrecaptured Section 1250 gain, taxed federally at up to 25%. The 3.8% net investment income tax applies on top of that once modified adjusted gross income passes $250,000 on a joint return or $200,000 for a single filer, unless the rental is part of a real estate professional’s business.

Oregon adds no investment income surtax of its own. Two local taxes can apply, though: residents of the Portland Metro district and of Multnomah County may owe the Metro Supportive Housing Services tax and the Preschool for All tax, which are local income taxes on higher incomes, and a large gain can push a seller into them. The City of Portland Revenue Division collects both.

Your Oregon tax is deductible on the federal return only as an itemized state and local tax deduction, which is capped, so on a sale of this size most of the Oregon tax gives no federal benefit.

Oregon withholding when a nonresident sells

If the seller is not an Oregon resident, the escrow agent must withhold Oregon tax at closing equal to the smallest of three amounts: 4% of the price, 8% of the gain includable in Oregon taxable income, or the net proceeds paid out. The escrow agent reports it on Form OR-18-WC and the seller claims it as a credit on the Oregon nonresident return.

Oregon residents selling as individuals are exempt. So are pass-through entities that file an Oregon Form OR-20-S or OR-65 and C corporations registered to do business in Oregon, which matters because many apartment buildings are held in an LLC taxed as a partnership.

• Sales for $100,000 or less are exempt.
• No withholding is required if the amount to be withheld would be under $100 per seller.
• A qualifying principal residence, a foreclosure and a court-supervised sale are exempt.
• Withholding is a prepayment. If it is more than the tax you owe, Oregon refunds the difference after you file.

Selling through an LLC or partnership

When an LLC taxed as a partnership sells the building, the gain passes through to the members, and each member pays Oregon tax on their share at their own rate. The entity itself is an exempt transferor for escrow withholding if it files Form OR-65, so no Oregon tax is held back at closing.

That exemption shifts the work to the members. An out-of-state partner still has Oregon-source income from the sale and needs to file an Oregon nonresident return, even though nothing was withheld. Before you list, get each member’s residence and expected share of the gain in front of your CPA so estimated payments are made on time.

Depreciation recapture in Oregon

Oregon taxes depreciation recapture as ordinary income at its regular rates, the same 9.9% that applies to the rest of a large gain. There is no Oregon equivalent of the federal 25% cap on unrecaptured Section 1250 gain, so the split between recapture and capital gain changes your federal bill but not your Oregon one.

The bigger Oregon issue is basis. Senate Bill 1507 (Oregon Laws 2026, chapter 142) stops Oregon following federal bonus depreciation for tax years beginning in 2026. You add the federal bonus amount back on your Oregon return and subtract it over the asset’s remaining life instead. If a cost segregation study puts 5-, 7- or 15-year property on your books in 2026 or later, your Oregon basis will be higher than your federal basis for years, and your Oregon gain and recapture on a sale will be smaller than the federal figures.

SB 1507 also moved Oregon’s tie to the Internal Revenue Code forward two years, to the end of 2025, and disconnected the state from the federal vehicle loan interest deduction and the federal exclusion for gain on qualified small business stock. Keep a separate Oregon depreciation schedule for any building you improve from 2026 on, and give it to your CPA when you sell.

Worked example: selling a $2M apartment building in Oregon

A married couple filing jointly sells a 16-unit building in Salem for $2,000,000 and pays $100,000 in selling costs, so the amount realized is $1,900,000. They bought it for $1,100,000 and have claimed $350,000 of depreciation, leaving an adjusted basis of $750,000. Their gain is $1,150,000: $350,000 of unrecaptured Section 1250 gain and $800,000 of long-term capital gain. Before the sale they have $250,000 of taxable income on both returns, and their MAGI is already over the $250,000 NIIT threshold. The building carries a $900,000 mortgage.

Federal tax: the $350,000 of Section 1250 gain is figured here at the 25% maximum, $87,500. The $800,000 capital gain sits on top of $600,000 of income, so $13,700 falls below the $613,700 line at 15% ($2,055) and $786,300 is taxed at 20% ($157,260). The 3.8% NIIT on the full $1,150,000 is $43,700. Federal total: $290,515.

Oregon tax: their income is already in the 9.9% bracket, so all $1,150,000 is taxed at 9.9%, or $113,850. Combined tax is $404,365, about 35% of the gain. After paying off the $900,000 loan, the couple nets $1,000,000 in cash before tax and about $595,635 after.

The same sale by a nonresident seller

If the same couple lived in Idaho and owned the building in their own names, escrow would withhold $80,000 at closing. That is 4% of the $2,000,000 price, which is smaller than 8% of the $1,150,000 gain ($92,000) and smaller than the $1,000,000 of net proceeds.

They would still owe Oregon tax on the Oregon-source gain, file an Oregon nonresident return and use the $80,000 as a credit against the roughly $113,850 due. A rough rule: on a highly appreciated building, withholding covers only part of the Oregon bill, so set aside the rest.

How a 1031 exchange changes the Oregon tax

A properly structured 1031 exchange defers the Oregon tax as well as the federal tax, because Oregon starts from federal taxable income and follows Section 1031. In the example above, buying a replacement of at least $1,900,000 with all $1,000,000 of net cash reinvested would push the entire $404,365 into the future.

Oregon keeps a claim on that deferred gain if you buy outside the state. Exchange an Oregon building for one in Arizona or Texas and you must file Form OR-24 for the year of the exchange and every year after until you dispose of the replacement property, and Oregon can tax the deferred Oregon-source gain when you finally sell. Our page on the 1031 exchange in Oregon covers OR-24, withholding on an exchange and Oregon’s rules for intermediaries.

Cash you keep in a partial exchange is boot and is taxed by both governments. The 1031 exchange calculator and the capital gains tax calculator run the federal side for your own figures.

Ways Oregon sellers reduce the tax

Deferral is the main tool, since Oregon gives no rate break on real estate gains.

• A 1031 exchange into Oregon property, which needs no OR-24 filing.
• An installment sale, which spreads the gain over several years; with a flat 9.9% top rate it mainly helps if your other income is below the top bracket in later years.
• Holding until death, so heirs receive a stepped-up basis for both federal and Oregon purposes.
• Keeping good records of capital improvements, which raise basis and cut the gain at 9.9% plus the federal rate.

Selling an Oregon apartment building

Skyline buys apartment buildings with five or more units in Oregon, from Portland and Salem to Eugene, Bend and Medford. We buy directly, close on your timeline, and can work inside 1031 deadlines. If you are exchanging, we can set a closing date that gives you time to line up the replacement first, and we work with your intermediary on the assignment.

For rent cap, notice and deposit rules that affect a sale, see our guide to Oregon landlord-tenant law for apartment owners, and for the annual carrying cost, our page on the property tax rate in Oregon.