Multnomah County has a new Preschool for All Tax that takes effect in 2021. The tax was approved by voters in November of 2020. Currently, Multnomah County is negotiating with the City of Portland to administer the tax program, so there are still some unknowns about the tax. However, we have learned enough to share how the tax may impact residents and non-residents of Multnomah County. What follows is information about the new tax along with examples of how the tax will be assessed.
Individual Tax:
- The tax is based on the Oregon taxable income in excess of the minimum exempt amounts. Those exempt amounts are:
- $125,000 for single tax filers.
- $200,000 for joint tax filers.
- The tax rate on the income above these excess amounts is 1.5%.
- There will be an additional 1.5% on income in excess of:
- $250,000 for single tax filers.
- $400,000 for joint tax filers.
- Residents of Multnomah County will pay the tax on their full Oregon taxable income in excess of the exempt amounts.
- Non-Residents of Multnomah County will pay tax on Multnomah County sourced income. The allocation will be based upon total gross income outside of Multnomah County compared to total gross income earned in Multnomah County.
When are payments due?
- For 2021, there will be no underpayment penalty for failure to withhold or pay quarterly estimated tax payments. The full 2021 tax can be paid when tax returns are filed on April 15, 2022. There will be required withholding and quarterly payment of taxes in 2022. There will be penalties in 2022 for under-withholding or underpayment of quarterly estimated tax payments.
Examples of how the Multnomah County Preschool for All Tax will be calculated:
Example #1
- Resident of Multnomah County
- Joint tax filing
- Oregon taxable income $300,000
- Calculation of Tax
- Oregon Taxable Income $ 300,000
- Less: Exempt Amount ( 200,000)
- Taxable Resident Income $ 100,000
- Tax Rate x 1.5%
- Tax owed $ 1,500
Example #2
- Resident of Multnomah County
- Joint tax filing
- Oregon taxable income $550,000
- Calculation of Tax
- Oregon Taxable Income $ 550,000
- Less: Exempt Amount ( 200,000)
- Taxable Resident Income $ 350,000
- Tax Rate x 1.5%
- First Level Tax Owed $ 5,250
- Income in Excess of $400k $150,000
- Tax Rate Second Level x 1.5%
- Second Level Tax Owed $ 2,250
- Total Tax Owed $ 7,500
Example #3
- Non-resident of Multnomah County
- Only source income from Multnomah County is a W-2 for $500,000
- All source gross income from all sources is $1,000,000
- Joint tax filing
- Oregon taxable income $600,000
- Calculation of Tax
- Oregon Taxable Income $ 600,000
- Allocation % (500k/1M) x 50%
- Non-Resident Allocated Income $300,000
- Less: Exempt Amount ( 200,000)
- Taxable Income $ 100,000
- Tax Rate x 1.5%
- Tax Owed $ 1,500
Example #4
- Non-resident of Multnomah County
- Only source income from Multnomah County is a W-2 with $250,000 of income
- Gross income from all sources is $500,000
- Joint tax filing
- Oregon taxable income $400,000
- Calculation of Tax
- Oregon Taxable Income $ 400,000
- Allocation % (250k/500k) x 50%
- Non-Resident Allocated income $ 200,000
- Less: Exempt Amount ( 200,000)
- Taxable Income $ 0
- Not Required to File Since Income is Not in Excess of Exemption
We hope the information and examples give you a better idea of what to expect with the new Preschool for All tax. As we indicated earlier, there are no penalties for failure to withhold or pay the tax during 2021, and the tax is not due until April 15, 2022. This gives everyone time to plan appropriately. We will provide more information about the tax and how it will be administered as the information becomes available.