Live in Montana, Work in Oregon: Which State Taxes Your Paycheck?
Answer
Both states tax the same wages, and a credit undoes the overlap. Oregon withholds as your work state and you file a Oregon nonresident return; Montana taxes residents on all income, so you also file at home and claim the credit for tax paid to Oregon. File Oregon first.
Last verified
Without an agreement between Montana and Oregon, the overlap is handled after the fact rather than prevented. That is why the filing order matters: the Oregon figure is an input to the Montana return, so completing Montana first means doing it twice.
A Montana resident taxed by another state on the same income claims the credit for taxes paid to other states on Form 2 (credit for income tax paid to another state). The credit is capped at the Montana tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
Oregon also has a layer below the state one, and it is the layer that survives every agreement: The Portland area layers two local income taxes on top of the state tax — the Metro supportive housing tax and the Multnomah County preschool tax — and both reach nonresidents on income sourced to the district. They are administered by the City of Portland Revenue Division, not the Department of Revenue.
What you file
- 1Nonresident return · OregonForm OR-40-N
File the Oregon nonresident return FIRST — you need the Oregon tax figure before you can complete Montana.
- 2Resident return · MontanaForm 2 (credit for income tax paid to another state)
File a Montana resident return reporting all income, then claim the credit for tax paid to Oregon. The credit is capped at what Montana would have charged on that same income, so if Oregon taxes it at a higher rate the difference is not refunded.
The two states, side by side
| Montana | Oregon | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | 1 (Form MW-4) | None |
| Convenience rule | No | No |
| Nonresident return | Form 2 with the nonresident/part-year schedule | Form OR-40-N |
| Credit for other-state tax | Form 2 (credit for income tax paid to another state) | Schedule OR-ASC-NP |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | Yes |
| Revenue department | Montana Department of Revenue | Oregon Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Oregon and working in Montana gives:Both states — credit offsets the double tax.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- Remote worker: Montana → OregonHome state only
- 1099 contractor: Montana → OregonHome state, plus the client state if you work there
- Moved mid-year: Montana → OregonTwo part-year returns
Other Montana pairs
Questions people actually ask
I live in Montana and work in Oregon. Which state takes the tax out of my paycheck?
Both states tax the same wages, and a credit undoes the overlap. Oregon withholds as your work state and you file a Oregon nonresident return; Montana taxes residents on all income, so you also file at home and claim the credit for tax paid to Oregon. File Oregon first.
Which state should my employer be withholding for?
Oregon. The wages are sourced to Oregon, so Oregon withholding is correct and there is no Montana withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. Montana gives residents a credit for tax paid to Oregon on the same income, claimed on Form 2 (credit for income tax paid to another state). The credit is capped at the Montana tax on that income, so if Oregon taxes it more heavily the excess is not refunded by either state.
How current is this?
The Montana and Oregon rules on this page were last checked against Montana Department of Revenue and Oregon Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- Montana Department of Revenue — individual income taxaccessed 2026-08-07
- Oregon Department of Revenue — individual income taxaccessed 2026-08-07