1031 exchange in
Oregon.

Does Oregon follow federal 1031 rules?

Oregon conforms to federal Section 1031 at the time of exchange but imposes one of the most aggressive clawback regimes in the country: when an OR resident exchanges into out-of-state replacement property, ORS 316.738 (individuals) and ORS 317.327 (corporations) require an annual report on Form OR-24 every year until the deferred gain is finally recognized — and OR taxes the gain when the out-of-state property is eventually sold.

How the Oregon clawback works

Oregon's clawback works through Form OR-24, an annual report that an OR resident (or non-resident with OR-source deferred gain) must file every year after a 1031 exchange where the replacement property is located outside Oregon. The form is due with your OR return each year and tracks the deferred OR-source gain until the replacement is finally sold. When the out-of-state replacement is eventually sold in a taxable transaction, ORS 316.738 (individuals) or ORS 317.327 (corporations) modifies your OR taxable income to recognize the original OR-source deferred gain — even if you've moved out of Oregon by then, even if the replacement was held for decades, even if you did chained 1031s. Failure to file OR-24 annually creates a statute-of-limitations gap that can let OR DOR assess years later with full penalties and interest. Practical implication: an OR-to-out-of-state 1031 is not a clean exit — you're filing OR returns indefinitely.

Oregon capital gains tax structure

Oregon taxes capital gains as ordinary income at a top marginal rate of 9.9% (2026), with no preferential long-term rate and no inflation indexing. There is no general sales tax, but Portland-area surcharges (Multnomah County preschool tax, Metro supportive-housing tax) can add another 3-4% on high-income earners.

Oregon's 9.9% top marginal rate kicks in at roughly $125K single / $250K joint — and capital gains are fully ordinary, no preferential treatment. Layer on Portland-area local taxes: Multnomah County's Preschool for All tax (1.5% above $125K single / $200K joint, 3.0% above $250K / $400K) plus Metro's Supportive Housing Services tax (1% above the same thresholds) push effective top rates north of 13% for Multnomah residents. Oregon does not conform to all federal pass-through provisions; the PTE elective tax (Form OR-21) lets passthroughs work around the federal SALT cap. Estimated payments are due quarterly when expected liability exceeds $1,000. The estate tax exemption remains $1M (unchanged since 2002, not inflation-indexed) — the lowest in the country and material for any 1031 exit-via-death plan.

Federal tax treatment of a successful 1031 is deferral of capital gain and unrecaptured Section 1250 depreciation recapture (federally taxed at a maximum 25% when eventually recognized). Oregon's state treatment sits on top of those federal rates.

Common 1031 replacement strategies in Oregon

Portland is in correction mode. Downtown Class A office trades at deep discounts to replacement cost (2024-2025 distressed sales repriced the basis), urban Class B retail is soft, and the multifamily market is digesting a heavy 2022-2024 supply pipeline plus the underwriting reality of SB 608 rent caps. Suburban Portland multifamily (Beaverton, Hillsboro, Vancouver-WA cross-border) trades 5.5-6.25% on stabilized A/B; urban core has widened to 6.0-7.0%. Salem is the steady-government tenancy play (Class B multifamily 6.5-7.5%). Eugene is University-of-Oregon-anchored and tighter than the metric suggests for student-adjacent product. The honest 1031 advice for OR sellers: if your replacement is out-of-state, model the OR-24 clawback liability into your exit valuation — that future tax is a real present-value drag.

Top Oregon CRE markets for 1031 buyers

Portland

Class A multifamily in the urban core trades 6.0-7.0% on stabilized product as of late 2025 — wider than the 4.5-5.5% pre-2022 band reflecting the SB 608 rent-cap reality, urban-flight headlines, and the heavy 2022-2024 supply pipeline still leasing up. Suburban Portland (Beaverton, Hillsboro) is tighter at 5.5-6.25% on Class A/B. Downtown Class B office is in distress — 2024-2025 sales repriced basis at 50-70% discounts to 2019 levels. The Multnomah County preschool tax + Metro housing tax stack pushes resident effective tax rates above 13%, which is driving meaningful wealth migration to Vancouver-WA across the river.

Salem

State-government tenancy is the anchor — most stabilized multifamily and small-bay office tenanted to state agencies trades 6.5-7.5% (Class B multifamily) and 7.0-8.0% (small-office). NNN retail along I-5 and the Lancaster Drive corridor sits in the 6.5-7.5% band on national-credit tenants. Salem is a steady-yield 1031 destination, not a growth play — broker depth is moderate and exit timelines run 6-9 months.

Eugene

University of Oregon anchors student-housing and adjacent multifamily — purpose-built student product trades tighter than the metric (5.5-6.5% on stabilized A) while conventional Class B garden-style runs 6.5-7.5%. Smaller market, thinner buyer pool than Portland or Salem. Industrial along the West 11th and Beltline corridors trades 7.0-8.5% on small-bay flex.

Local counsel, recording, and filing in Oregon

Oregon is a deed-of-trust state with non-judicial foreclosure as the default path. Title insurance rates are not state-regulated. Recording is at the county level (36 counties) and Multnomah, Washington, and Clackamas counties have idiosyncratic transfer-tax rules — Washington County imposes a 0.1% real estate transfer tax (the only county in OR allowed to charge one, grandfathered before the statewide ban). For any Portland-metro deal involving SB 608 rent-cap compliance, retain OR landlord-tenant counsel to scrub the rent roll before you close — over-the-cap increases create rescission and treble-damage exposure for the buyer.

Recent developments in Oregon

SB 608 (2019) — first-in-the-nation statewide rent control. The 2026 maximum allowable annual rent increase is 9.5% (7% + CPI), as published by the Oregon Department of Administrative Services. Properties under 15 years old are exempt from the cap, which is the underwriting tell for new-construction 1031 buyers. Multiple 2025-2026 legislative attempts to raise the $1M estate tax exemption (HB 2058, HB 2301, SB 1511) have stalled — the exemption remains $1M.

Common mistakes in Oregon 1031 exchanges

• Ignoring the OR-24 annual filing after exiting to out-of-state. Oregon residents (and non-residents with OR-source deferred gain) who exchange into out-of-state replacement property must file Form OR-24 every year until the replacement is finally sold. Skipping the filing doesn't make the clawback go away — it pauses the statute of limitations and lets OR DOR come back years later with assessments, penalties, and interest. Set the recurring calendar reminder before you close the upleg.
• Underwriting OR multifamily without modeling SB 608 rent caps. Statewide rent control limits annual residential rent increases to 7% + CPI (9.5% in 2026) on properties 15 years or older. Out-of-state buyers underwriting OR multifamily on Sun Belt rent-growth assumptions consistently overpay — your 7% trended rent growth model is illegal in Oregon. Properties under 15 years old are exempt from the cap, which creates a meaningful pricing wedge between new-construction and value-add product.
• Forgetting OR's $1M estate tax exemption when planning the 1031 exit. Oregon's estate tax exemption is $1M, unchanged since 2002 and not indexed for inflation — the lowest in the country. If your 1031-laddered real estate plus other assets cross $1M at death, OR estate tax kicks in at rates from 10% to 16%. The federal exemption ($13.99M for 2026) doesn't help you here. Do the OR-resident estate plan with an OR-licensed attorney before you do the third 1031 — many OR residents are unknowingly building OR-taxable estates that would have been better held in trust or relocated.

What to do if you're starting a Oregon-source 1031

1. Engage a Qualified Intermediary before the downleg closes. Your QI cannot be a disqualified person (attorney, CPA, or real estate agent who has represented you in the last two years).
2. Confirm state conformance and any clawback or withholding filings with a Oregon-licensed CPA. Oregon's active clawback regime makes this non-optional.
3. Identify replacement property within 45 days in writing, delivered to your QI, under the Three-Property Rule or one of the alternative identification rules.
4. Close on replacement within 180 days of the downleg closing or by your federal tax-return due date (with extensions), whichever is earlier.
5. File Form 8824 with your federal return reporting the exchange. File any required Oregon state forms for the year, including any clawback or withholding-exemption filings.

FAQ: 1031 exchanges in Oregon

How does Oregon's 1031 clawback actually work?

When an OR resident (or non-resident with OR-source deferred gain) exchanges OR property into out-of-state replacement, ORS 316.738 / 317.327 require an annual Form OR-24 filing tracking the deferred OR-source gain. When the out-of-state replacement is finally sold in a taxable transaction, OR recognizes the original deferred gain and taxes it — even if you've moved away, even if decades have passed, even if you chained multiple 1031s. There is no exit other than dying in a state with full step-up basis or relocating before the trigger event in a way OR doesn't recognize (hard).

What is the maximum allowable rent increase under Oregon's SB 608 for 2026?

9.5% (7% + the published CPI). The Oregon Department of Administrative Services publishes the cap by September 30 for the following calendar year. The cap applies to residential rental properties 15 years or older — newer properties are exempt. Notice requirements are 90 days for increases up to 10% and 180 days for increases above 10% (rare, since the cap is below 10% in 2026).

Can I avoid the Oregon clawback by moving out of Oregon before selling the replacement property?

No. The clawback attaches to the deferred OR-source gain at the time of the original exchange — it follows the gain, not the taxpayer's residency. Moving to Washington, Texas, or Nevada doesn't let you skip the OR-24 filings or the eventual recognition. A well-structured DST or installment sale within OR before the 1031 is the harder, smarter conversation.

Does Oregon have non-resident withholding on real estate sales?

Yes — Oregon requires 8% withholding on the consideration paid (or the gain, in some cases) on sales by non-residents, payable via Form OR-18-WC. For 1031 exchanges, you can file Form OR-18-WC before closing to claim a withholding waiver — without it, 8% gets withheld at closing and you have to claim it back via the annual return. Always file the waiver pre-closing.

Why is the Oregon estate tax such a big deal for 1031 planning?

Because the OR exemption is $1M, has not been raised since 2002, and is not indexed for inflation — by far the lowest in the country. A modest 1031-laddered real estate portfolio plus a primary residence and 401(k) easily crosses $1M, triggering OR estate tax at 10-16% on the excess. The federal exemption ($13.99M for 2026) gives you no OR shelter. OR-resident 1031 investors who plan to die holding their real estate need a serious estate plan.

Are there any Oregon counties with a real estate transfer tax?

Just one — Washington County imposes a 0.1% real estate transfer tax, grandfathered before Oregon's 1997 statewide ban on new local transfer taxes. Multnomah, Clackamas, and the rest of the state have no transfer tax, which is one of the few real bright spots in OR transaction friction.