Oregon Payroll Tax Increases: Paid Leave, Transit, and UI

Oregon employers pay six separate state-level payroll taxes in 2026, and most of the rates and wage bases changed from the prior year. Paid Leave Oregon holds at 1% total but on a higher wage cap. TriMet and Lane Transit District rates ticked up. Unemployment insurance stays on Schedule 3. And the statewide transit tax is sitting at 0.1% pending a voter referendum that could double it. Here are the 2026 Oregon payroll tax rates, who pays each one, and how they get filed.

Paid Leave Oregon

The total contribution is 1% of each employee’s gross wages, split 60/40 between employee and employer. Workers pay 0.6% through withholding; the business pays 0.4%.¹

Businesses with fewer than 25 employees do not owe the 0.4% employer share, but they still withhold the 0.6% employee portion.¹

Wages above the Social Security contribution and benefit base are not subject to the contribution. For 2026 that cap is $184,500, up from $176,100.² Payroll systems carrying the old ceiling will under-collect once high earners cross the prior year’s threshold.

Statewide Transit Tax

The statewide transit tax is 0.1% of gross wages, withheld entirely from the employee. It applies to every Oregon resident’s wages regardless of work location, and to nonresident wages for work performed in Oregon. There is no wage cap.³

The Oregon Legislature passed HB 3991 in a 2025 special session to double the rate to 0.2% starting January 1, 2026. That increase is on hold. The Secretary of State certified Initiative Petition 302 on December 30, 2025, referring the increase to voters. Until the election, the rate stays at 0.1%.³ Watch the election result and be ready to change withholding if voters approve it.

Even employees whose regular pay falls below the Oregon income tax withholding threshold still have this tax deducted.

TriMet and Lane Transit District Taxes

If your employees perform work inside the TriMet or Lane Transit District boundaries, you owe a separate employer-paid tax on those wages. Employees do not contribute.

Both rates are up from the prior year under long-term funding schedules that authorize small annual increases. Liability follows where the work is physically done, not where your office sits. A business based outside a district that sends workers in owes the tax on those wages, and mismapping the boundary is the most common mistake in this area.

Unemployment Insurance

Employers pay Oregon unemployment insurance in full. For 2026 the state remains on Tax Schedule 3, with experience-rated rates from 0.9% to 5.4%.⁶ New employers with fewer than 12 months of reported payroll pay a base rate of 2.4%.⁷

The taxable wage base is $56,700 per employee for 2026.⁶ Once an employee’s year-to-date wages exceed that figure, no further UI tax accrues on their pay for the year.

Workers’ Benefit Fund

The Workers’ Benefit Fund is billed per hour worked, not as a percentage of wages. For 2026 the assessment is 1.8 cents per hour, split evenly: the employer withholds 0.9 cents per hour from the employee and pays the matching 0.9 cents.⁸⁹

It applies to all employees who are covered by, or required to be covered by, workers’ compensation insurance. Employers exempt from mandatory coverage who have not voluntarily elected coverage are also exempt from this assessment. Unpaid volunteers are excluded even if the employer’s policy covers them.

How and When to File

All six taxes are reported on a single quarterly return, the Oregon Combined Quarterly Tax Report (Form OQ), filed through Frances Online. The form also covers state income tax withholding.¹⁰

Reports are due the last day of the month after each quarter closes: April 30, July 31, October 31, and January 31. If a due date lands on a weekend or holiday, filing rolls to the next business day.¹⁰

Money withheld from paychecks is trust fund money. The business holds it for the state and cannot spend it on operating costs. That legal status is what puts individuals on the hook when a company falls behind.

Penalties and Personal Liability

Oregon’s late-payment penalties stack. Paying late but filing on time triggers a 5% delinquency penalty on the unpaid tax. If the return is more than a month past due, a 20% failure-to-file penalty is added on top of the 5%. The Department of Revenue can then demand the return within 30 days; ignoring that demand adds a further 25% penalty on the department’s estimated deficiency.¹¹ Interest runs on top of all of it.

Under ORS 316.207, the state can collect unpaid withholding directly from officers, members, or employees who were in a position to pay the taxes or direct their payment and knew or should have known they went unpaid.¹² Intent is not required. Delegating payroll to a bookkeeper or outside service is not a defense, and more than one person at the same company can be held jointly and severally liable for the full amount.

A business that is current on all returns and deposits can ask for a penalty waiver through Revenue Online or in writing, with an explanation and supporting documents. Processing runs three to six months, and the department generally does not waive interest even when it forgives the penalty.¹³

1
Oregon Public Law. Oregon Code 657B.150 – Contributions
2
Social Security Administration. Contribution and Benefit Base
3
Oregon Department of Revenue. Statewide Transit Tax
4
TriMet. Payroll and Self-Employment Tax Information
5
Lane Transit District. Payroll and Self-Employment Tax Information
6
State of Oregon. Current Tax and Contribution Rates
7
Oregon Employment Department. Unemployment Insurance Tax and Paid Leave Oregon Contribution Rates Hold Steady for 2026
8
State of Oregon. Workers’ Benefit Fund
9
Oregon Secretary of State. Workers’ Compensation Division – Workers’ Benefit Fund Assessment
10
Oregon Department of Revenue. Withholding and Payroll Tax
11
Oregon Public Law. Oregon Code 314.400 – Penalty for Failure to File Report or Return or to Pay Tax When Due
12
Oregon Public Law. Oregon Code 316.207 – Liability for Tax, Warrant for Collection
13
Oregon Department of Revenue. Penalty Waivers