1031 Exchange in Oregon: Deferred-Gain Tracking, Withholding and DSTs

Oregon tracks deferred gain on Form OR-24 until the replacement property is sold

Oregon lets you defer state tax in a 1031 exchange, but when Oregon business or investment property is exchanged for property outside Oregon you must file Form OR-24, Oregon Like-Kind Exchanges/Involuntary Conversions, starting with the exchange year and continuing annually until you dispose of the replacement property. Each exchange goes on its own form, and the deferred gain is carried over from federal Form 8824.

The form attaches to your OR-40, OR-40-N or OR-40-P with the 'Form OR-24' box checked, or to the OR-65, OR-41 or OR-20 series for entities. If you no longer have an Oregon filing requirement, the Department of Revenue asks you to submit it through Revenue Online, which requires an account tied to a previously filed Oregon return.

The purpose is to keep Oregon-source gain Oregon's. When the replacement property is finally sold in a taxable transaction, the OR-40 instructions say you report the gain to Oregon when it is reported on your federal return, even if you have moved to Washington or Nevada by then. An exchange of Oregon property for other Oregon property needs no OR-24 at all.

Withholding under ORS 314.258 and how Form OR-18-WC zeroes it for an exchange

If the seller is a nonresident individual or a C corporation not doing business in Oregon, the escrow agent or attorney handling closing must withhold the least of 4% of the consideration, the net proceeds, or 8% of the gain includable in Oregon taxable income, unless the consideration is $100,000 or less. Oregon residents selling Oregon property are outside the rule entirely.

The exchange mechanism lives on Form OR-18-WC. In Part D the transferor computes the gain and enters on line 11 the excludable gain from a federal nonrecognition section, citing IRC §1031, so taxable gain and the 8%-of-gain figure fall to zero and the payment on line 16, the smallest of the three amounts, is nothing. The authorized agent still mails the original form to the Department within 30 days of closing.

Two cautions follow. The agent relies on the seller's calculation, so the form has to be prepared before closing, not after; and if the exchange later fails or you take boot, the gain is taxable in Oregon for that year regardless of what was withheld. Part C's exemption boxes cover a sale of $100,000 or less and a fully excluded personal residence, not exchanges.

Real estate gains are ordinary income in Oregon, up to 9.9%

Oregon has no capital gains preference. Gain on an investment property is taxed at the same graduated rates as wages: 4.75%, 6.75%, 8.75% and 9.9%, with the 9.9% bracket beginning at $125,000 of taxable income (single) and $250,000 (joint). Those top thresholds are fixed in statute and not indexed, while the lower brackets are adjusted each year.

On a $500,000 gain a full-year resident already in the top bracket defers $49,500 of Oregon tax through a successful exchange, on top of the federal deferral. Nonresidents pay Oregon tax on Oregon-source gain at the same rates through the OR-40-N, which is why the withholding rule above exists.

Depreciation recapture, boot and any cash taken out of the exchange are recognized under the federal rules Oregon adopts; the framework is explained in what a 1031 exchange is.

No deed tax anywhere in Oregon except a grandfathered county

ORS 306.815 forbids any city, county, district or other political subdivision from imposing a tax or fee on the transfer of a fee estate in real property, except for a tax whose ordinance was already in effect on March 31, 1997. Washington County's transfer tax, which predates that date, is the exception Portland-area investors run into; Multnomah and Clackamas deeds carry no such tax.

Neither leg of an Oregon exchange therefore carries a state or county stamp; the closing statement shows recording fees and title charges only. For investors used to states that tax every deed, that is a real saving on both the relinquished and any Oregon replacement property.

Measure 50 keeps assessed value from resetting when you sell

Under ORS 308.146 a property's maximum assessed value can rise by at most 3% a year, being the greater of 103% of the prior year's assessed value or 100% of the prior maximum, and the taxable assessed value is the lesser of that maximum and real market value. A change of ownership is not among the events that reset maximum assessed value; new construction, rezoning and lot-line adjustments are.

For a seller, the buyer inherits your assessed value rather than a bill recalculated from the price, which supports pricing on well-held property. For anyone exchanging into Oregon property, the tax bill you underwrite is essentially the seller's, and the 3% cap is your protection against a sudden jump.

Rent caps and the 15-year exemption for Oregon landlords

Oregon limits residential rent increases statewide. Under ORS 90.323 and 90.324 the maximum annual increase for calendar year 2026 is 9.5%, the lesser of 10% or seven percent plus CPI as published by the Office of Economic Analysis, with a separate 6% limit for larger manufactured-dwelling parks and marinas under HB 3054 (2025).

Dwelling units whose first certificate of occupancy was issued less than 15 years before the notice are exempt, and a landlord who exceeds the cap owes the tenant three months' rent plus actual damages. Investors leaving Oregon multifamily often weigh that cap against a diversified DST; investors buying Oregon rentals should underwrite it.