Oregon’s pass-through entity elective tax gives LLC, S corp, and partnership owners a way to reduce federal taxable income by paying Oregon tax at the entity level. The election is voluntary and must be made annually – it does not carry forward automatically. Qualifying owners receive an Oregon credit that offsets the state tax owed on the same income, while the entity-level payment creates a federal deduction that partially works around the $10,000 SALT cap. Eligibility depends on ownership structure, and a single ineligible owner can block the election for the entire entity. With Oregon’s top individual rate at 9.9% in 2026, high-income owners in pass-through businesses have a real opportunity to capture federal savings if they plan ahead and file Form OR-21 on time.
