How Oregon withholds on a bonus
Oregon lets employers withhold a flat 8% on supplemental wages paid separately, a rate set between the state's 6.75% and 8.75% brackets. On a $10,000 bonus the percentage method withholds $2,200 federal, $620 Social Security, $145 Medicare and $800 Oregon, leaving $6,235. The 0.2% statewide transit tax ($20), Paid Leave Oregon's 0.6% employee share ($60) and, for Portland-area residents above the thresholds, the Metro and Multnomah County taxes also come out of a bonus and are not included.
A $60,000 single filer's actual Oregon marginal rate is 8.75% (the bracket from $11,400 to $125,000 of taxable income), so the 8% flat rate slightly under-withholds, by about $75 on a $10,000 bonus. Under the aggregate method Oregon applies its brackets to the combined paycheck, withholding at 8.75% and, for larger bonuses, 9.9%; the federal line rises to about $2,700.
What the withholding means for your Oregon return
The state line on an Oregon bonus leaves a small balance of about $75 per $10,000 for a filer in the 8.75% bracket, offset by federal over-withholding of roughly $750 for a $60,000 earner. Oregon's deduction for federal tax paid, capped at about $8,250, means the extra federal withholding on a bonus can slightly reduce Oregon tax for filers below the cap. Washington residents who earn a bonus for work in Oregon are withheld for Oregon on it. The Oregon paycheck calculator shows the marginal rates for any salary. Allowances on Form OR-W-4 do not reduce the flat 8% withheld from a separately paid bonus; they apply only under the aggregate method.