Oregon Preschool for All Tax: Rates, Withholding, and Safe Harbors

The Oregon Preschool for All tax is a Multnomah County personal income tax, not a statewide Oregon tax, collected by the City of Portland’s Revenue Division to fund tuition-free preschool inside the county. It applies to single filers with Oregon taxable income above $125,000 and joint filers above $200,000, at a rate of 1.5%, with an additional 1.5% (for a total of 3%) on income above $250,000 single or $400,000 joint.¹ If your Oregon taxable income sits below the entry thresholds, you owe nothing.

Who Owes the Tax

Three groups fall within the tax: full-year Multnomah County residents, part-year residents for the portion of the year they lived in the county, and non-residents who earn income from sources inside the county.¹ Even a few months of residency makes you a part-year resident, and your Oregon taxable income during that period counts toward the thresholds.²

Non-residents owe only on income sourced within the county: wages earned at a Multnomah County workplace, rental income from county property, or business profits generated inside county lines. Residents have 100% of their Oregon taxable income measured against the thresholds.²

The thresholds are based on Oregon taxable income, so Oregon-specific deductions and adjustments apply before the income is compared to $125,000 or $200,000.

Remote Work

Wage income is generally sourced to where you physically perform the work. Living in Multnomah County and working remotely for an out-of-state employer still produces county income, because residency captures everything. Living outside the county and occasionally working at a Multnomah County office can produce county-sourced income for the days worked in-county. Residents who pay another state’s income tax on the same earnings can claim a credit against the PFA tax, provided the other state doesn’t already grant a nonresident credit on that income.³

Rates for 2026 and the Delayed 2027 Increase

For tax year 2026, the rates hold at prior levels:

1.5% on taxable income above $125,000 (single) or $200,000 (joint)
An additional 1.5% on income above $250,000 (single) or $400,000 (joint), for a total of 3% on that upper portion

The rates are marginal. A single filer with $150,000 in Oregon taxable income owes 1.5% on the $25,000 above $125,000, which is $375.²

The 2020 ballot measure that created Preschool for All included an automatic 0.8% rate increase originally set for January 1, 2026.⁴ On September 5, 2024, the county approved Ordinance 1326, pushing that increase back one year to January 2, 2027.⁵ If it takes effect on the new schedule, the baseline rate rises to 2.3% and the upper tier to 3.8% starting with tax year 2027.¹

Filing and Paying

The return is Form MC-40, filed through Portland Revenue Online at Pro.Portland.gov.⁶ Portland’s Revenue Division collects the tax on Multnomah County’s behalf, which is why filers interact with Portland systems rather than the county directly.²

Returns follow the federal and state schedule, generally due April 15. A six-month filing extension is automatic if you submit any estimated balance owed by the original due date; if you don’t owe, your federal or state extension serves as your PFA extension. The extension gives more time to file, not more time to pay.¹

Employer Withholding

Employers with a Multnomah County location must withhold PFA tax from employees who earn $200,000 or more during the calendar year. The default rate is 1.5% on income above $200,000 and 3% on income above $400,000.⁷

There’s a gap that catches single filers. The withholding trigger is $200,000 regardless of filing status, but single filers owe starting at $125,000. If you’re single and earn between $125,000 and $200,000, your employer will not automatically withhold. You can use the Multnomah County Opt In/Out form to request voluntary withholding, or handle it yourself with estimated payments.⁷

Estimated Quarterly Payments

Starting with tax year 2026, quarterly estimated payments are required only if you expect to owe $5,000 or more for the year. That’s a large jump from the prior $1,000 threshold.⁵ At current rates, a single filer would need roughly $458,000 in taxable income before the estimated-payment requirement kicks in, so far fewer filers will need to make quarterly payments than in previous years.

When required, quarterly payments follow the federal estimated-tax schedule: April 15, June 15, September 15, and January 15 of the following year. Payments go through Portland Revenue Online.

Penalties and Safe Harbors

Missing the filing deadline or underpaying triggers escalating penalties. The Revenue Division applies a late payment penalty of 5% of the unpaid balance if you’re four months late or less, rising to 25% if you’re more than four months late. Failing to file for three or more consecutive years adds a penalty of 100% of the outstanding balance across all those years. Filing on time is worth doing even if you can’t pay the full balance.

Underpaying through the year (rather than filing late) draws its own penalty: 5% of the unpaid tax, with a $5 minimum. Two safe harbors avoid it: pay at least 90% of your current-year tax liability by the due date, or pay 100% of your prior year’s liability by the due date.¹ The prior-year safe harbor is helpful when income fluctuates, because matching last year’s number shields you even if you end up owing much more. Interest also runs on any unpaid balance after the due date.

The Metro Supportive Housing Services Tax

Most people who owe PFA also owe Metro’s Supportive Housing Services (SHS) tax, which covers the broader Portland tri-county area. SHS is a flat 1% on taxable income above $125,000 for individuals and $200,000 for joint filers, and beginning in tax year 2026 those thresholds are adjusted annually for inflation.⁸

Both taxes are filed on the same Form MC-40 through Portland Revenue Online. A Multnomah County resident with $150,000 in taxable income owes $375 for PFA plus $250 for SHS, or $625 in local income taxes on top of Oregon state tax. The combined bite grows quickly at higher incomes and often surprises people during their first Multnomah County filing season.

Federal Deductibility

The PFA tax is a local income tax, so it counts toward the federal state and local tax (SALT) deduction if you itemize. For 2026, the SALT cap is $40,400 for most filers and $20,200 for married filing separately, and it covers all state and local income taxes and property taxes combined. For many Multnomah County homeowners, Oregon income tax and property taxes exhaust the cap before PFA is even added, so the local tax may deliver no additional federal deduction in practice. A phasedown reduces the cap further for high earners, though it doesn’t fall below $10,000.⁹

1
Portland.gov. Personal Income Tax Filing and Payment Information
2
Multnomah County. Multnomah County Preschool For All Personal Income Tax
3
Portland.gov. Credit for Taxes Paid to Another State
4
Multnomah County. Board Weighs One-Year Pause in Scheduled Increase in the Preschool for All Tax on High Earners
5
Multnomah County. Multnomah County Ordinance Amending MCC 11.546
6
Portland.gov. Instructions for Form MC-40 Tax Year 2025
7
Portland.gov. Personal Income Tax Withholding Information for Employers and Payroll Providers
8
Oregon Metro. Supportive Housing Services Funding
9
Office of the Law Revision Counsel. 26 USC 164 – Taxes