Minimize Taxes, Maximize Wealth!

Impact on Your Paycheck

As an Oregon resident, you face one of the highest state income tax rates in the country at 9.9%. Even non-residents working in Oregon are subject to this income tax.

If you reside in Multnomah County or the Metro Region, additional local taxes apply on top of the state taxes.

High Income Earners Pay Even More

Some high-income earners in Oregon end up with an effective marginal tax rate exceeding 50% when you combine all the taxes.

Opportunities to Reduce Your Tax Bill

Fortunately, strategic planning can help you reduce and defer taxable income. In this post, we’ll explore a few ways you may be able to retain more of your hard-earned money by maximizing tax-advantaged accounts and opportunities.

Oregon Tax Strategies

Maximize Your 401(k) Contributions

You can contribute to your 401(k) on a pre-tax or Roth basis.

In 2024:

  • If you’re under 50, you can contribute up to $23,000.
  • If you’re 50 or older, you can contribute an additional $7,500 totaling $30,500.

Contributing on a pre-tax basis is one of the most effective ways for high-income earners to reduce taxable income.

Pre-Tax 401(k) Contributions Reduce Your Taxable Income  

Pre-tax contributions lower your current tax bill by reducing your gross income before taxes. You will pay taxes on this income when the funds are withdrawn in retirement.

Managing Your Taxes During Retirement

Pre-tax contributions offer flexibility in managing taxes during retirement, potentially allowing you to pay taxes at a lower rate.

Enroll in a Deferred-Compensation Plan (DCP) – if Available to You

Employers like Nike, Intel, and Microsoft offer a Deferred Compensation Plan to highly compensated employees.

Reduce Taxable Income

Like your 401(k), you use DCP to contribute and invest dollars on a pre-tax basis. This will reduce taxable income in the year you make the deferral. 

How Much Income Can You Defer?

You choose how much compensation to defer and the future payout structure, which varies by employer. Maximize contributions to all pre-tax accounts, including your 401(k) and HSA, before allocating income to a deferred compensation plan.

Before enrolling and contributing to a deferred compensation plan, you should think about how long you plan to stay with the company.

It may not make a lot of sense to defer sizable portions of your income if you don’t plan to stay with the company long term. Each plan will have a set of rules around what happens to the money in your account should you leave before retirement.

DCP Distributions and Your Future Tax Bill

You’ll be taxed on these distributions, so planning for the tax implications each year after you start taking withdrawals is essential.

Consider all future income sources, including Social Security, Required Minimum Distributions (RMDs) from other retirement plans, and any continuing vesting of Restricted Stock Units (RSUs) after your employment ends, to make informed decisions.


Explore Tax-Efficient Investments

A few options include Health Savings Accounts (HSAs), which offer triple tax advantages, and Exchange Traded Funds (ETFs).

Health Savings Accounts (HSAs)

A Health Savings Account (HSA) allows you to use pre-tax income for eligible medical expenses.

Triple Tax Advantage

HSAs offer triple tax advantages—contributions are tax-deductible, the funds in your HSA grow without incurring taxes, and withdrawals for qualified medical expenses are tax-free.

If used correctly, HSAs can be a highly tax-efficient investment vehicle.

Exchange Traded Funds (ETFs) or Mutual Funds

Traditional ETFs are typically more tax-efficient than mutual funds.

Typically holding an ETF in a taxable account will generate less tax liabilities (capital gains, interest, dividends) than if you held a similarly structured mutual fund in the same account.

Oregon Tax Planning Strategies

Tax-Loss Harvesting

Tax-loss harvesting is a strategy that can possibly help reduce taxes on your investments.

  • Review the investments in your portfolio.
  • Find any that are currently worth less than what you originally paid for them. These are “unrealized losses” – losses that only exist on paper.
  • If you have any investments that show gains this year, you can sell the ones currently at a loss to cancel out the gains and lower your taxes.

Charitable Gifting

Donations to non-profits are not just a way to support organizations you are passionate about; these donations can also have a positive impact on your tax bill.

An efficient way to give back is through a Donor Advised Fund (DAF).

  • You can contribute cash, securities, or other assets to the DAF.
  • You will receive an immediate tax deduction for the tax year in which the contribution is made.
  • Invest the funds in your DAF, which can potentially grow tax-free — increasing the amount available for future charitable gifts.

Mitigating Your Tax Bill in Oregon

Maximizing contributions to retirement accounts, investing in tax-efficient vehicles, and implementing other tax-efficient strategies can lead to significant savings.

Working with a financial advisor and tax professional can help you find what tax-efficient strategies can work best for you. Together, you can make informed decisions that align with your long-term financial plan.