Oregonians will have to pay for their federal stimulus money this tax season

(The Center Square) – The federal government is not going to tax stimulus checks, but the state of Oregon will this tax season.

That’s because of Oregon’s tax code, which has a provision called the federal tax subtraction, a deduction on the taxes Oregonians pay at the federal level.

Under this system, the less federal tax Oregonians pay, the more they will pay back to the state.

Last year, Congress approved two bipartisan pandemic relief packages in March and December for people earning less than $75,000 and to married couples filing jointly earning less than $150,000.

The first package gave individuals a $1,200 one-time payment, with a $600 one-time payment as part of the second package. Couples with children ages 17 and younger were also eligible for an additional $500 and $600 one-time payment per child for the first and second packages, respectively.

The Oregon Legislative Revenue Office reports a couple with two children who received a stimulus of $3,400 would see that money added back to their taxable state income at a rate of 8.75%. They would owe about $298.

As another example, a single Oregonian who pocketed $1,800 in stimulus last year would owe the state about $157.50 when they file their taxes.

An Oregonian who normally sees a refund of $200 will get $42.50 back this year. Someone who normally sees a $100 refund may have to pay $57.50 back.

Oregon is one of six states – which include Alabama, Iowa, Louisiana, Missouri, and Montana – to offer such a tax provision.

Oregonians faced a similar situation more than a decade ago during 2009’s tax season.

Millions of American taxpayers received one-time stimulus payouts as part of the $152 billion Economic Stimulus Act of 2008 at the start of the Great Recession.

Back then, eligible taxpayers received $300 per dependent children ages 17 and younger on top of their individual payment. That payment was equal to the payer’s net income tax liability below $600 for a single person or $1200 for a married couple filing jointly.

President Joe Biden is proposing $1,400 one-time payments as part of a new $1.9 trillion relief package. Congressional leaders have not yet decided what the income threshold will be this time around should the package pass.

In May, Oregon’s Legislative Revenue Office estimated that some 870,000 Oregonians could see their state-level tax liability go up thanks to their stimulus payments.

That could still add $103 million to state coffers to cover the rising costs of things like housing and wildfire relief, but thousands of Oregonians will still be walking away from 2020 with less money than they though.

Currently, the Oregon Legislature has not seen any new bills this year addressing the state’s federal tax liabilities.

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