Oregon Portland Local Tax Guide 2026: Metro SHS, Multnomah PFA, and the Washington Commuter Trap

Portland, Oregon has developed one of the most complex local tax environments of any US city outside Ohio and Pennsylvania. On top of Oregon's state income tax (graduated to 9.9%), Portland-area workers and residents face two separate local income taxes, each requiring its own filing, plus a flat-amount arts tax. Together, these can push the combined state and local effective rate above 13% for high earners — comparable to California.

The Metro Supportive Housing Services (SHS) Tax and the Multnomah County Preschool for All (PFA) Tax were both enacted by voters in recent years to fund specific programmes. They are administered together by the City of Portland Revenue Division, which collects on behalf of Metro and Multnomah County, but they have different rate structures, different income thresholds, and different geographic scopes.

Perhaps the most surprising aspect of Portland's tax environment: Washington state residents who commute to Portland owe both Oregon income tax and the Metro SHS Tax on their Portland wages, even though they live in a state with no income tax. The Metro jurisdiction extends to the geography of the tax, not the residence of the taxpayer — and Oregon has its own non-resident withholding requirements. The Portland metro area is one of the most-analysed examples of cross-state tax complexity in the US.

Oregon State Income Tax 2026

Oregon's state income tax is the baseline. Oregon has no sales tax — state revenue relies heavily on income tax. The 2026 rates (indexed for inflation from prior year brackets):

Note: Oregon income tax brackets are indexed annually for inflation. The figures above are approximate 2026 values. Verify exact thresholds with the Oregon Department of Revenue for the current tax year.

Oregon has no sales tax — this is a key feature. Workers and retirees from high-sales-tax states like Washington (9.38% average combined) often underestimate Oregon's high income tax offset against its sales tax-free advantage.

Oregon Residency and Non-Resident Filing

Oregon taxes residents on worldwide income and non-residents on Oregon-source income. Washington state residents employed by Oregon companies and working physically in Oregon owe Oregon income tax on their Oregon-source wages. Oregon has payroll withholding requirements for employers — including non-Oregon employers who have employees physically working in Oregon.

Metro SHS Tax: 1% on Income Above $128,000 (2026 Threshold)

The Metro Supportive Housing Services (SHS) Tax funds housing services for unhoused and at-risk populations in the Portland Metro area. It was enacted by Metro voters in 2020 and took effect January 1, 2021.

Who Owes the Metro SHS Tax

The Metro SHS individual income tax applies to:

• Metro residents: Individuals residing within the Metro jurisdictional boundary on income above the thresholds
• Non-Metro residents with Metro-source income: Non-residents who earn income from work performed within the Metro boundary also owe Metro SHS on that income. Physical presence in Metro is the determining factor — not the employer's location. A non-resident who worked remotely from outside Metro for a Metro-based employer owes no Metro SHS on those remote days.

Metro jurisdiction: The Metro boundary encompasses most of the Portland metropolitan area including Portland, Beaverton, Gresham, Lake Oswego, Tualatin, Tigard, Hillsboro, Milwaukie, and many unincorporated areas of Multnomah, Washington, and Clackamas counties. It does not include Clark County, Washington (across the Columbia River). Use Metro's address lookup tool at metro-region.org to confirm whether a specific address falls within Metro boundaries.

Metro SHS Individual Tax Rates — 2026 Inflation-Adjusted Thresholds

Important: 2026 is the first year Metro SHS thresholds are inflation-adjusted. Prior years (2021–2025) used fixed thresholds of $125,000/$200,000.

What is taxed: Oregon taxable income — wages, self-employment income, business income, investment income (as included in Oregon taxable income). The Metro SHS tax mirrors Oregon's taxable income definition.

Metro SHS Employer Payroll Tax

Separately, employers with annual payroll of $5 million or more within the Metro jurisdiction owe a 0.1% employer payroll tax on Metro-sourced wages. This is an employer-side tax — employees who owe the individual Metro SHS also owe it separately.

Filing and Remittance

Both the individual Metro SHS tax and the Multnomah PFA tax are administered by the City of Portland Revenue Division even though they are not City of Portland taxes. Metro SHS is filed on Form MET-40 (full-year Metro residents) or Form MET-40-NP (non-residents and part-year residents). The Multnomah PFA is filed on Form MC-40 (full-year county residents) or Form MC-40-NP. If you are subject to both with the same residency status, you may file a combined return via Portland Revenue Online (PRO.Portland.gov).

Employers must withhold Metro SHS for employees who request it or who earn over $200,000/year. Appears on W-2 Box 20 as "METRO." Quarterly estimated payments required if current-year liability is $5,000 or more AND prior-year liability was also $5,000 or more (threshold increased from $1,000 to $5,000 starting tax year 2026). Deadline for returns: April 15 — same as federal and Oregon.

Multnomah County PFA Tax: 1.5% / 3% on High Incomes

The Multnomah County Preschool for All (PFA) Tax funds universal preschool in Multnomah County. Enacted by Multnomah County voters in 2020, it took effect January 1, 2021.

Who Owes Multnomah PFA

The PFA tax applies to:

• Multnomah County residents on all income above the thresholds
• Non-residents with Multnomah County-sourced income above the thresholds

Multnomah County includes Portland, Gresham, Troutdale, and the unincorporated county. It does not include Washington County (Beaverton, Hillsboro) or Clackamas County — residents of those counties who work in Multnomah County owe PFA on their Multnomah-sourced wages, but residents of those counties who work only in their home county do not owe PFA.

PFA Tax Rates (2026)

Worked example — Portland resident, $300,000 taxable income (single):

• Oregon state income tax: approximately $23,700 (using 8.75% bracket on $203,800 + 9.9% on $50,000)
• Metro SHS: 1% × ($300,000 − $128,000) = 1% × $172,000 = $1,720 (using 2026 threshold)
• Multnomah PFA: 1.5% × $125,000 + 3% × $50,000 = $1,875 + $1,500 = $3,375
• Total state + local income tax: approximately $28,795
• Effective rate on $300,000: 9.6%

Adding in the Portland Arts Tax ($35) brings total local + state to approximately 9.6% effective rate — among the highest in the US for this income level, comparable to New York City (combined state + NYC at $300k) and California.

The Washington State Commuter Trap

The Portland-Vancouver, WA corridor is one of the most significant cross-state tax situations in the US. Approximately 65,000-80,000 workers commute across the Columbia River daily. Many Washington residents choose to live in Vancouver (Clark County, WA) specifically to avoid Oregon's income tax — but the reality is more complex.

What Washington Commuters Owe

A Clark County, WA resident who works in Portland, Oregon owes:

• Oregon state income tax: On all Oregon-source wages (the state where work is performed). Oregon has mandatory withholding requirements for employers. At $100,000 in Oregon wages, this is approximately $7,600 in Oregon income tax.
• Metro SHS Tax (if wages exceed $128,000 in 2026): Non-residents with Metro-source income above the 2026 threshold owe Metro SHS on the Metro-attributable income. A Vancouver, WA resident earning $200,000 in Portland owes 1% × ($200,000 − $128,000) = $720 Metro SHS in 2026.
• Washington state income tax: $0 (Washington has no income tax)
• Multnomah County PFA: Non-residents with Multnomah County-source income above $125,000 (single) also owe PFA on those wages.

What Washington commuters do NOT owe:

• No Washington state income tax
• No Portland Arts Tax (applies only to Portland city residents)
• No Metro SHS employer payroll tax (that's the employer's obligation)

Commuters Below $128,000 (2026 SHS Threshold)

For Washington residents earning under $128,000 in Oregon in 2026, they owe Oregon state income tax only — no Metro SHS and no PFA. The tax savings from living in Washington (zero state income tax) are eliminated by the Oregon non-resident withholding, so in terms of income tax these workers are in virtually the same position as an Oregon resident with the same income at this level. Oregon residents additionally pay Oregon income tax on any non-Oregon income, however.

Remote Workers in Washington for Oregon Employers

A Washington resident who works 100% remotely from their Clark County home for a Portland employer earns Washington-source income (work performed in Washington). They owe no Oregon income tax (Oregon source rules require physical presence in Oregon). They owe no Washington income tax (Washington has none). They owe no Metro SHS or PFA. This is the one scenario where the Washington-Oregon commuter truly achieves a 0% state/local income tax rate.

Portland Arts Tax and Combined Burden

The Portland Arts Tax ($35/year) is a flat tax on every Portland city resident over 18 with income above the federal poverty line. It funds arts education in Portland public schools and arts organisations. It is filed and paid directly to the City of Portland Revenue Division.

At $35/year, the Arts Tax is trivial in absolute terms but creates a third mandatory filing requirement for Portland residents who already file Oregon state income tax, Metro SHS, and Multnomah PFA returns. Failure to pay the Arts Tax results in penalties and interest.

Total Combined Tax Burden for Portland Residents

For comparison: a Seattle, WA resident at $500,000 income pays $0 in state and local income tax (Washington has none, and Seattle has no city income tax). The Portland-Seattle income tax differential is significant for high earners in Pacific Northwest tech and finance.