PORTLAND, Ore. (KOIN) — Stimulus checks are not required to be paid back and they’re not taxed at the federal level. But they are being taxed at the state level in Oregon.
The state of Oregon is collecting tax on stimulus checks when residents file their state income tax returns. To figure out how much is owed, filers should multiply their stimulus payment by Oregon’s state tax rate of 8.75%.
For example, a single person in Oregon likely received $1,800 in stimulus payments. That person would pay the state $157.50 when they file their taxes. For someone who would typically get a refund of $200, this year, they will only get $42.50 back. Someone who typically sees a $100 refund will end up owing $57.50.
A family that received even more stimulus money could end up owing hundreds of dollars to the state. But not everyone will have their stimulus payments taxed. It won’t impact people in lower-income tax brackets who don’t have a federal tax liability or higher-income filers who are already above the federal tax subtraction limitation.
“There’s a lot of things that factor into it and so that might not be the only reason why they’re owing money but yes that could be one of them,” said Shannon Bell, a personal income tax policy manager with the Oregon Department of Revenue. “There are five, I believe five states that have the federal tax subtraction which is normally a great thing because it reduces your income on your state return but in this situation, it is impacting them by not reducing their income.”
Sunnymax Effiong with Sunny Tax Service said people have been surprised to learn that their stimulus checks were not completely tax free. Effiong was also caught off guard.
“I’ve had a few of my clients raise the same concern: how is this fair?” Effiong said.
People in Washington don’t pay state income tax so they won’t be facing the same issue. Bell said the Oregon Department of Revenue is following current law and the same thing happened with the stimulus payments people received in 2008.