Oregon Stock Options Tax: No LTCG Break, a 2026 QSBS Shock, and Portland Metro Surcharges Up to 4%

Oregon is a surprising state for stock option holders. It has no sales tax and a progressive income tax that tops out at 9.9% — competitive with California (13.3%) and New York (10.9%) for most income levels. But 2026 brought a major negative change: Governor Kotek signed SB 1507 on April 9, 2026, decoupling Oregon from the federal QSBS exclusion retroactive to January 1, 2026.¹ Oregon residents who sell qualified small business stock in 2026 now owe Oregon income tax — up to 9.9% — on gains that are entirely excluded at the federal level. A founder with a $10M federal QSBS exclusion still owes Oregon up to $990,000 in state tax on the excluded gain.

There are meaningful reliefs on the ISO side: Oregon follows federal treatment on ISO exercises — no state income tax at the time you exercise — and Oregon has no state alternative minimum tax.² The ISO exercise-year bill is entirely a federal AMT question for Oregon residents, with no state-level AMT charge. But Portland-area residents face a further complication: Metro Supportive Housing Services and Multnomah County Preschool for All surcharges can push the combined Oregon-side marginal rate on option income past 13% for high earners in Multnomah County.

Here is the state-by-state comparison on the issues that matter most to stock option holders:

The summary: Oregon is better than California on ISO exercises (no state income at exercise, no state AMT) but worse than California on QSBS in 2026 (Oregon decoupled, CA simply never conformed — same net result, but Oregon's retroactive application is a shock). Compared to Washington, Oregon's income tax makes it the more expensive state for tech employees with large option grants.

Oregon Income Tax Rates 2026

Oregon imposes four progressive income tax brackets on all types of income — wages, ordinary income, and capital gains alike — with no preferential rate for long-term capital gains:³

Lower bracket thresholds adjusted annually for inflation by Oregon DOR. Confirm exact thresholds at oregon.gov/dor. The 9.9% top-bracket threshold ($125,000 single / $250,000 MFJ) is set by statute and confirmed for 2026.

For tech employees exercising large NQSOs or selling after IPO, the effective marginal Oregon rate on the option income is almost always 9.9%: regular salary alone typically pushes you past the $125,000 single threshold before you touch your options. Add federal tax (37% ordinary income on NQSO exercise or up to 20% LTCG + 3.8% NIIT on ISO qualifying dispositions) and the combined bill on a large option event easily exceeds 50%.

Oregon also allows resident taxpayers to subtract a portion of their federal income taxes paid from Oregon taxable income (ORS 316.695). For 2026 the subtraction is capped for higher earners and phases out for larger incomes — consult an Oregon tax advisor for the exact calculation in your situation. This subtraction partially offsets the 9.9% headline rate but does not change the fundamental picture for large option exercises.

ISO Treatment in Oregon: No State Income Tax at Exercise

Oregon's starting point for individual income tax is federal adjusted gross income (AGI).² ISO exercise spreads do not appear in federal AGI — they are AMT preference items under IRC §56(b)(3), not ordinary income. Because Oregon taxes what's in federal AGI (subject to Oregon modifications), no Oregon income tax is imposed when you exercise ISOs. Oregon also has no state alternative minimum tax, so there is no secondary state-level AMT charge on top of the federal AMT you may owe. The entire exercise-year tax decision for Oregon ISO holders is purely a federal AMT question.

ISO qualifying disposition in Oregon

For a qualifying ISO disposition (shares held at least 2 years from grant and at least 1 year from exercise), the entire gain is long-term capital gain for federal purposes at 20% (+ 3.8% NIIT if income is above the NIIT threshold). Oregon taxes that gain as ordinary income with no LTCG preference — up to 9.9%. The qualifying-disposition hold makes a dramatic federal difference (20% vs 37%) but provides zero Oregon benefit. Drive the qualifying-disposition decision entirely on federal tax optimization, not Oregon considerations.

ISO disqualifying disposition in Oregon

A disqualifying disposition converts the bargain element to W-2 ordinary income for federal purposes. Oregon taxes that W-2 income at up to 9.9%. Any additional gain above the exercise-date FMV is capital gain income — also taxed by Oregon at ordinary income rates. From an Oregon perspective, there is no material difference between a qualifying and disqualifying disposition: both result in Oregon ordinary income rates on the option gain. The entire qualifying-vs-disqualifying analysis is a federal tax calculation.

NQSO Treatment in Oregon

Nonqualified stock option exercises are straightforward: the spread between exercise price and fair market value at exercise is W-2 ordinary income, included in federal AGI and taxed by Oregon at progressive rates up to 9.9%. Any gain realized when you later sell the shares above the exercise-date FMV is capital gain — Oregon taxes it at the same ordinary income rates (no LTCG preference).

No Long-Term Capital Gains Preference in Oregon

Oregon taxes all capital gains — short-term and long-term — as ordinary income at the same progressive rates.³ Federal law taxes long-term capital gains at 0%, 15%, or 20% depending on income level. Oregon provides no parallel benefit: the same 8.75% or 9.9% rate applies regardless of how long you held the shares. This means:

• The qualifying-disposition ISO hold (≥2 years from grant, ≥1 year from exercise) provides a large federal tax savings (20% vs 37%) but zero Oregon state savings — you pay Oregon ordinary income rates either way
• Long-term holds on NQSO shares after exercise do not reduce Oregon tax on the subsequent gain — only federal tax benefits from a longer hold
• Tax-loss harvesting in Oregon reduces both federal and Oregon taxable income and is particularly valuable given Oregon's 9.9% top rate

The 2026 QSBS Shock: Oregon SB 1507

Oregon previously conformed to the federal §1202 QSBS exclusion. Oregon residents who sold qualified small business stock could exclude the gain at both the federal and Oregon levels. That ended in 2026.

Oregon SB 1507 was signed by Governor Kotek on April 9, 2026, effective retroactive to January 1, 2026.¹ Oregon decoupled from the federal §1202 exclusion: any QSBS gain excluded from federal income must be added back when computing Oregon taxable income. An Oregon resident who sells QSBS stock in 2026 and excludes $12M at the federal level still owes Oregon income tax on the full $12M gain at ordinary income rates — up to 9.9%, or $1,188,000 in Oregon tax alone.

What triggered SB 1507

Oregon's legislature passed SB 1507 as a budget-balancing measure in response to the revenue impact of OBBBA federal tax cuts. Oregon estimated that conforming to OBBBA's expanded QSBS exclusions (cap raised from $10M to $15M; gross-asset limit raised to $75M) would cost Oregon significant revenue. SB 1507 decoupled Oregon from the entire §1202 exclusion — not just the OBBBA expansion, but the pre-OBBBA exclusion as well — for all QSBS dispositions occurring on or after January 1, 2026.

Retroactivity: who is at risk

The retroactive effective date creates a problem for Oregon residents who sold QSBS between January 1, 2026 and April 9, 2026 (the signing date), relying on the prior-law conformity. Those transactions are now subject to Oregon tax on the full excluded gain, even though the law didn't exist when the transaction occurred. Oregon residents in this situation may face unexpected tax bills and should consult an Oregon tax advisor immediately about estimated payment requirements.

Portland Metro Surcharges: Metro SHS and Multnomah County PFA

Oregon residents in the Portland metropolitan area face two additional income taxes layered on top of state income tax. Both apply to the same income that is subject to Oregon income tax — including stock option income.⁴

Metro Supportive Housing Services (SHS) Tax — 1%

The Metro SHS tax is a 1% flat tax on income above $128,000 (single) / $205,000 (MFJ) for 2026 (thresholds adjusted annually for inflation). It applies to all residents within the Metro jurisdictional boundary — roughly Multnomah, Washington, and Clackamas counties — not just Portland city proper. An Intel engineer in Beaverton (Washington County), a Nike employee in Hillsboro, or an employee in Lake Oswego (Clackamas County) may all be subject to the Metro SHS tax depending on their exact address.

Multnomah County Preschool for All (PFA) Tax — 1.5% to 3%

The Multnomah County PFA tax applies only to residents of Multnomah County (Portland, Gresham, and the immediately adjacent unincorporated county). For 2026:

• 1.5% on Multnomah County taxable income above $125,000 (single) / $200,000 (MFJ)
• An additional 1.5% (3% total) on income above $250,000 (single) / $400,000 (MFJ)

The Multnomah County PFA applies to the same taxable income as Oregon state income tax, which includes stock option gains, NQSO exercise spreads, and qualifying-disposition capital gains recognized in the year.

Combined Portland-area marginal rate

A Portland (Multnomah County) resident exercising a large NQSO block faces a combined Oregon-side marginal rate of 13.9% — higher than any single-state rate except California's 13.3%. Add federal tax (37% ordinary income, FICA Medicare) and the combined rate on NQSO exercise income for a Portland resident can approach 55%+. This is not a hypothetical: many Intel, Adidas, Nike, and Portland-area tech startup employees are in this situation.

Employees who live in Washington County (Beaverton, Hillsboro) or Clackamas County outside Portland are subject to Metro SHS but not Multnomah County PFA — their combined Oregon-side top rate is 10.9% rather than 13.9%. For employees with residential flexibility, the county-of-residence decision matters more than most people realize.

Nonresident Sourcing: OAR 150-316-0165

Oregon allocates nonqualified stock option income to Oregon for nonresidents (and former Oregon residents) based on a workday fraction under OAR 150-316-0165.⁵ The formula:

Oregon-source income = exercise spread × (Oregon workdays during grant-to-exercise period ÷ total workdays during grant-to-exercise period)

If you received NQSO grants while working in Oregon and have since relocated to another state, Oregon will claim a fraction of your option income as Oregon-source income when you exercise. You would file an Oregon nonresident return and pay Oregon tax on the sourced fraction — even though you no longer live in Oregon.

The sourcing rules for ISOs and RSUs follow a similar workday-fraction methodology under Oregon's nonresident allocation rules, though the recognition event differs (for ISOs, the recognition event is typically the sale, not the exercise). Former Oregon residents holding ISO shares exercised during their Oregon residency should be aware that the subsequent sale may trigger Oregon nonresident tax on the portion of gain attributable to Oregon workdays — even if they're long gone from the state.

Six Planning Strategies for Oregon Stock Option Holders

1. Time ISO exercises for federal AMT management — Oregon imposes no exercise-year constraint

Oregon's no-exercise-income, no-state-AMT structure means the exercise-year Oregon tax bill is zero regardless of how many ISOs you exercise (provided you're an Oregon resident at exercise). The entire ISO exercise-timing decision is a federal AMT calculation. Determine your federal AMT safe zone — the exercise spread that keeps federal AMT at zero or within acceptable range — and execute within that limit. Oregon adds no constraint. Use the ISO AMT Calculator below to model the federal side before exercising. The state bill on ISOs comes only at sale, giving you flexibility to manage Oregon income in a different year.

2. Model the Portland Metro surcharges before exercising NQSOs

For Multnomah County residents, the effective marginal rate on NQSO exercise income is 13.9% Oregon-side — 9.9% state, 1% Metro SHS, 3% county PFA. Before exercising a large NQSO block, model the full picture: does spreading the exercise across two calendar years reduce your Oregon bracket exposure? The Metro SHS threshold is $128,000 for single filers and the PFA top rate kicks in at $250,000 — coordinating exercises to straddle the year-end can save meaningful amounts on these surcharges. If you have residential flexibility and a large exercise upcoming, the difference between a Multnomah County and Washington County address is worth calculating before you move.

3. QSBS: do not rely on the federal exclusion being Oregon-exempt in 2026

SB 1507 is currently in effect and applies to all QSBS dispositions on or after January 1, 2026. If you are an Oregon resident planning a QSBS sale, assume you owe Oregon income tax at up to 9.9% on the federally excluded gain — do not plan around potential 2027 legislative fixes. If you have timing flexibility on a QSBS sale (e.g., the company has a lockup, or you control the timing of a secondary sale), consult an Oregon tax advisor about whether a pre-2026 disposition or a post-2027-session-outcome disposition might change the tax result. For sales that can't be timed: budget for Oregon tax on the full excluded QSBS gain and build that into your net-proceeds calculation.

4. Calculate your Oregon sourcing ratio before exercising if you recently left Oregon

If you relocated out of Oregon in the past 1–4 years and still hold unexercised Oregon-era grants, compute your current Oregon sourcing ratio before exercising. The denominator (total workdays since grant) grows every month you delay while working outside Oregon, shrinking the Oregon fraction. Waiting 12 months post-relocation meaningfully reduces the Oregon nonresident bill. Model the break-even: does the tax saving from a lower sourcing ratio outweigh the risk that the underlying stock moves unfavorably during the wait?

5. For early-exercise candidates: close and fund quickly to minimize Oregon sourcing exposure

If you receive an offer with early-exercise rights and plan to early-exercise at grant (plus file an 83(b) election), do it immediately — before accruing any Oregon workdays on the option. If you early-exercise the day you receive the grant, the entire grant-to-exercise period is zero workdays, and there is no Oregon-source income. This contrasts with waiting even 6 months, at which point 6 months of Oregon workdays begin to build up the sourcing fraction for any future nonresident exercise. The 83(b) election window is 30 days from the grant date — act fast. The QSBS clock also starts at early exercise.

6. Time NQSO exercises to clear the Social Security wage base and Oregon bracket thresholds

The 2026 Social Security wage base is $184,500.⁶ NQSO exercise spreads are W-2 wages subject to 6.2% Social Security tax (employee portion) up to this limit. If your regular salary pushes past $184,500 before mid-year, exercising NQSOs in the second half avoids the 6.2% FICA entirely — you owe only 1.45% Medicare (plus 0.9% Additional Medicare above $200,000). Separately, the Multnomah County PFA rate steps from 1.5% to 3% at $250,000 (single) and the Metro SHS threshold is $128,000 (single). Structuring exercises to stay just below the $250,000 PFA step-up can save meaningful amounts on Portland-area surcharges.

1. Oregon SB 1507 — QSBS decoupling from federal §1202 exclusion. Signed by Governor Kotek on April 9, 2026; effective retroactive to January 1, 2026. Oregon residents who sell qualified small business stock on or after January 1, 2026 must add back any federally excluded QSBS gain when computing Oregon taxable income. Sources: The Startup Law Blog: Oregon SB 1507 — QSBS Gains Now Taxable at State Level; The Startup Law Blog: Oregon QSBS Decoupling Is Law — What Kotek's Signing Letter Means for Founders; Foster Garvey: Senate Bill 1507 — Breaking Down What It Means to Oregon Businesses.
2. Oregon ISO treatment and no state AMT. Oregon's individual income tax begins with federal adjusted gross income (ORS 316.048). ISO exercise spreads are AMT preference items under IRC §56(b)(3), not included in federal AGI — therefore no Oregon income tax is imposed at ISO exercise. Oregon repealed its state alternative minimum tax; no state-level AMT applies to ISO exercises. Sources: Oregon Department of Revenue — Personal Income Tax; T. Mann Financial: Oregon Employee Stock Options Planning; confirmed by absence of Oregon state AMT provisions in ORS Chapter 316.
3. Oregon 2026 income tax brackets and no LTCG preference. Oregon imposes four progressive tax rates: 4.75%, 6.75%, 8.75%, 9.9%. The 9.9% top bracket applies to income over $125,000 (single) / $250,000 (MFJ). Oregon provides no preferential rate for long-term capital gains — all capital gains taxed as ordinary income. Sources: Oregon Department of Revenue — Personal Income Tax; Tax Foundation: Oregon Tax Rates & Rankings 2026; Oregon Pacific Financial Advisors: Key Numbers for 2026.
4. Portland Metro SHS and Multnomah County PFA taxes. Metro Supportive Housing Services tax: 1% on income above $128,000 (single) / $205,000 (MFJ) for 2026, applicable to residents within the Metro jurisdictional boundary (portions of Multnomah, Washington, and Clackamas counties). Multnomah County Preschool for All: 1.5% on income above $125,000 (single) / $200,000 (MFJ); 3% on income above $250,000 (single) / $400,000 (MFJ). Sources: Oregon Metro — Income Tax Information (Metro SHS); Portland Revenue Division — Personal Income Tax Filing and Payment Information (Multnomah County PFA).
5. Oregon nonresident stock option sourcing: OAR 150-316-0165. Oregon allocates nonresident NQSO income using a grant-to-exercise workday ratio: Oregon-source income = exercise spread × (Oregon workdays during grant-to-exercise period ÷ total workdays during grant-to-exercise period). Sources: OAR 150-316-0165 — Gross Income of Nonresidents: Personal Services (Oregon Public Law); Or. Admin. Code § 150-316-0165 (Cornell LII); Moss Adams: Sourcing Matters — When Stock Options and State Residency Collide.
6. 2026 Social Security wage base: $184,500. NQSO exercise spreads are W-2 wages subject to 6.2% employee Social Security tax up to this limit. Source: SSA.gov — Contribution and Benefit Base 2026.

Values verified May 2026. Oregon SB 1507 (signed April 9, 2026) is current law for tax year 2026; legislative or referendum changes may follow in 2027. Confirm current-year values and any legislative updates with a qualified Oregon tax advisor before making irreversible decisions.