Two states with opposite tax systems
Oregon taxes personal income. Washington, according to its Department of Revenue, does not currently have an individual income tax. Washington instead leans on sales tax and the Business and Occupation tax, a tax on gross receipts. The Washington Department of Revenue itself has described the sales tax gap between Clark County and Multnomah County as the greatest in the country.
For households in Vancouver, Camas, Battle Ground and the rest of Clark County, that split shapes everyday decisions. Living in Washington does not take Oregon income tax off the table if your paycheck is earned in Oregon. And running a business in Washington does not keep you out of Oregon taxes if you work or sell across the bridge.
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Washington residents who work in Oregon: the OR-40-N
If you live in Washington and earn wages in Oregon, you are an Oregon nonresident with Oregon source income, and you file Form OR-40-N. Oregon taxes nonresidents only on Oregon source income. For wages, the instructions say to report what you earned while working in Oregon for each job.
For tax year 2025, the OR-40-N instructions set filing thresholds based on Oregon gross income. A single filer must file above $2,835, a married couple filing jointly above $5,670, and a head of household above $4,560. Part year residents, such as someone who moved from Portland to Vancouver during the year, generally use Form OR-40-P instead.
Oregon works out your tax using the ratio of your Oregon source income to your total federal income. If your W-2 does not show Oregon wages separately, you prorate by days worked in Oregon compared with total days worked. Hybrid workers who split the week between a Portland office and a home office in Camas need good records here, because days at home in Washington are not Oregon work days.
Oregon also has a statewide transit tax of 0.1% on wages. For nonresidents, it applies only to wages for services performed in Oregon, and your employer withholds it.
What is included
- Oregon nonresident return (OR-40-N) or part year return (OR-40-P)
- Day count and wage allocation for hybrid and remote workers
- Metro SHS and Preschool for All nonresident returns
- Review of W-2 withholding for Oregon, METRO and MULT
- Washington B&O tax and sales tax guidance for businesses
- Oregon CAT and Portland business tax review for Washington companies
- Planning around Washington capital gains and the coming income tax
Portland local taxes for Washington commuters
Higher earners who commute into Portland can also owe local income taxes, even though they do not live in Oregon. Nonresidents with Metro source income file Form MET-40-NP for the Metro Supportive Housing Services tax if their Metro taxable income is over the threshold. For tax year 2025 that threshold is $125,000 for single filers and $200,000 for joint filers.
The Multnomah County Preschool for All tax works the same way for nonresidents. You are taxed only on income sourced within the county, using Form MC-40-NP, once you pass the same $125,000 and $200,000 thresholds. Employers withhold these taxes for employees who earn $200,000 or more in a calendar year, and the withholding appears on your W-2 as METRO and MULT.
The Portland Arts Tax is a resident tax, so Washington residents do not owe it. Our page on Portland local taxes explains the rest.
Washington businesses: B&O tax and sales tax
The Business and Occupation tax is a gross receipts tax on businesses operating in Washington. Unlike an income tax, it allows no deduction for labor, materials or other costs, so a business can owe B&O tax in a year it loses money. The rate depends on the classification of each activity, such as retailing or service, and a business with more than one activity may report under more than one classification.
The Department of Revenue assigns each business a monthly, quarterly or annual reporting schedule based on its expected tax and type of business. Some Washington cities also charge their own business taxes, which the state does not administer, so a Vancouver business may have city filings as well.
Washington businesses that sell taxable goods or services also collect sales tax. Contractors, retailers and service businesses based in Clark County often have customers on both sides of the river, and keeping Washington and Oregon receipts separate in the books makes every one of these returns easier.
Washington capital gains and the new income tax on very high earners
Washington does tax some investment income. Its capital gains tax is 7% on the sale or exchange of long term capital assets, applies only to individuals, and comes with a standard deduction that was $278,000 for 2025. Starting with tax year 2025, taxable gains above $1 million pay an additional 2.9%, for 9.9% on that part. Real estate is exempt.
There is also a change ahead. In 2026 the Washington Legislature passed Senate Bill 6346, which creates a 9.9% income tax on individuals and married couples filing jointly with adjusted gross income over $1 million. The Department of Revenue says the tax begins 1/1/2028, with the first returns due in April 2029. For most Clark County households this will not apply, but business owners planning a sale or a move should talk to a CPA well before then.
Oregon businesses with Washington work, and the other way around
A Vancouver company that works in Portland can owe Oregon taxes. The City of Portland and Multnomah County business taxes reach businesses operating in the City or County, and the Oregon Corporate Activity Tax applies to anyone doing business in Oregon once their Oregon commercial activity passes the thresholds.
An Oregon company with Washington customers or crews may need to register with the Washington Department of Revenue and report B&O tax. A CPA who handles both states can map out where you have filing duties and keep you from paying tax twice on the same activity where the rules allow it.
Who this suits
- Vancouver, Camas and Battle Ground residents with Oregon jobs
- Hybrid workers splitting time between Portland and Washington
- People who moved across the river during the year
- Clark County contractors and service businesses with Oregon clients
- Oregon businesses with Washington customers or crews
Common questions
I live in Vancouver and work in Portland. Do I pay Oregon income tax?
Yes, on your Oregon source income. You file Form OR-40-N as an Oregon nonresident if your Oregon source income is above the filing threshold.
Does Washington have a state income tax?
The Washington Department of Revenue says the state does not currently have an individual income tax. A new 9.9% tax on adjusted gross income over $1 million begins 1/1/2028.
I work from home in Camas two days a week. Are those days taxed by Oregon?
Oregon taxes nonresidents on wages earned while working in Oregon. If your W-2 does not separate Oregon wages, you prorate by the days you worked in Oregon.
Do Washington residents owe the Portland Arts Tax?
No. The Arts Tax applies to Portland residents. Washington residents who work in Portland may still owe Metro SHS or Preschool for All tax if their income is over the thresholds.
What is the Washington B&O tax?
It is a gross receipts tax on businesses operating in Washington. Costs such as labor and materials cannot be deducted, and the rate depends on the type of activity.
I moved from Portland to Vancouver this year. Which Oregon form do I use?
Part year residents generally file Form OR-40-P. A CPA can split your income between the time you lived in Oregon and the time you lived in Washington.
Can I get the Oregon kicker as a nonresident?
For tax year 2025, the kicker was claimed as a credit on the OR-40-N. You needed a 2024 Oregon tax liability and had to file your 2024 return before your 2025 return.