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The Share of Your Retired Pay Earned Before October 1991 Is Oregon Tax-Free

Oregon subtracts military retired pay attributable to service BEFORE 1 OCTOBER 1991. If all your creditable service predates that date, the whole payment is subtracted. Otherwise it is PRORATED: months of creditable service before 1 October 1991 over total months of service. So a career spanning the date is partly exempt, and the calculation is arithmetic rather than a yes-or-no test. This is not a headline exemption and it is easy to skip — but for a retiree who entered service in the 1970s or 1980s the exempt share can be most of the payment.

Verified August 27, 2026

What this benefit is

Oregon subtracts military retired pay attributable to service BEFORE 1 OCTOBER 1991. If all your creditable service predates that date, the whole payment is subtracted. Otherwise it is PRORATED: months of creditable service before 1 October 1991 over total months of service. So a career spanning the date is partly exempt, and the calculation is arithmetic rather than a yes-or-no test. This is not a headline exemption and it is easy to skip — but for a retiree who entered service in the 1970s or 1980s the exempt share can be most of the payment.

What it's worth: The pre-October 1991 share of retired pay subtracted, prorated by months of service

  • FULL SUBTRACTION if ALL creditable service predates 1 OCTOBER 1991.
  • OTHERWISE PRORATED: months of creditable service before 1 October 1991 divided by total months of service.
  • A career spanning the date is PARTLY exempt — it is arithmetic, not a yes-or-no test.
  • Applies to Oregon taxpayers receiving military retired pay.
  • A retiree who entered service in the 1970s or 1980s may find most of the payment exempt.
  • Someone whose service began entirely after 1 October 1991 gets nothing under this provision.

Who is entitled to it

  • You are in one of the groups this reaches.
  • You receive military retired pay.
  • Some of your creditable service predates 1 October 1991.
  • Oregon income tax.

Not sure whether that describes you?

Answer a few questions about this benefit specifically — we only ask what this one actually depends on, and we stop as soon as we know.

How to claim it

Deadline: With the annual Oregon return
  1. 1Work out your months of creditable service before 1 October 1991, and your total months.
  2. 2The fraction of those two is the share of retired pay you subtract.
  3. 3If all your service predates the date, subtract the whole payment.
  4. 4Do not skip this because your career spans the date — a partial subtraction is still worth having.
  5. 5Keep the calculation with your return; the Department of Revenue may ask how the proration was derived.
Form
Oregon individual income tax return
File with
Oregon Department of Revenue
Annual
Claimed once a year.
Worth knowingOregon is often listed as taxing military retirement in full. That is true for service after October 1991 and false for service before it, which is the sort of distinction a state-by-state comparison table cannot carry.

Sources

This finder provides an informational match, not a government eligibility determination. The responsible agency decides your application.