If you live in the greater Portland metropolitan area, you have likely heard of the “Metro SHS” tax. It is one of the most significant local tax changes in recent history, yet many high-earners are still surprised by the bill come April.

Unlike the “Arts Tax” (which is a flat fee), the Metro Supportive Housing Services (SHS) Tax is a 1% tax on taxable income. If you are a high-income earner or a business owner, getting the math wrong on this can lead to substantial underpayment penalties.

Here is what you need to know for the 2026 Tax Year.

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TL;DR: The SHS Snapshot

• The Rate: 1% on taxable income above the threshold.
• Who Pays (Individuals): Single filers making over $128,000 or Joint filers making over $205,000.
• Who Pays (Businesses): Businesses with gross receipts over $5 million.
• Geography: Applies to residents of Clackamas, Washington, and Multnomah Counties (within Metro jurisdiction).
• Due Date: April 15.

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1. The Individual Tax: Do You Owe It?

Most small business owners encounter this tax on their personal return (Form 1040), not their business return.

The Income Thresholds (2026 Inflation Adjusted)

You only pay the 1% tax on the income above these lines:

• Single / Married Filing Separately: Income over $128,000.
• Married Filing Jointly: Income over $205,000.

Example: You and your spouse live in Lake Oswego and have a combined taxable income of $250,000.

• The first $205,000 is exempt.
• You owe 1% on the remaining $45,000.
• Total Tax Bill: $450.

Crucial Note for S-Corp Owners (The K-1 Rule)

If you own an S-Corp, your business profits flow through to your personal return via a K-1.

• Yes, K-1 income counts. The Metro SHS tax applies to your Oregon Taxable Income, which includes wages, dividends, and business profits.
• Common Mistake: Many business owners assume that because their business makes less than $5 million (see below), they are exempt. False. You are exempt from the Business tax, but you still owe the Personal tax on that profit if your total family income exceeds $205k.

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2. The Business Tax: The $5 Million Cliff

There is a separate component of the SHS tax that applies directly to business entities (C-Corps, S-Corps, Partnerships).

• The Rule: If your business has annual gross receipts (sales) of over $5 million, you must pay the 1% business tax.
• The Exemption: If your gross receipts are under $5 million, your business owes $0 for this specific tax (though you still must file an exemption on Metro’s system).
• Most small businesses will fall under this $5M threshold and only deal with the personal side.

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3. Geography Matters: The “Non-Resident” Trap

This tax is tied to the Metro District boundaries, which is confusing because “Metro” is not the same as “Portland.”

• Who is in: Most of Beaverton, Hillsboro, Gresham, Lake Oswego, Tigard, and Portland.
• Who is out: Parts of rural Clackamas County, Sandy, and some edges of Washington County.
• The Split: If you live outside the district but work inside the district (or vice versa), you only pay tax on the income earned within the Metro boundary. This requires careful apportionment calculations.

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4. How to Pay (and Avoid Penalties)

The Metro SHS tax is collected by the City of Portland Revenue Division, even if you live in Beaverton or Clackamas.

• Where to file: You file this on Portland Revenue Online (PRO).
• Payroll Withholding: Since 2021, employers are required to offer withholding for this tax. If you are an employee, check your paystub. If you are a business owner, you need to ensure your payroll software (Gusto/ADP) is set up to withhold this for you, or you must make estimated quarterly payments.
• Quarterly Estimates: If you expect to owe more than $1,000 in Metro SHS tax at the end of the year, you are required to make quarterly estimated payments. Failure to do so results in a penalty.

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Frequently Asked Questions

Is this the same as the “Preschool for All” (PFA) tax? No. They are separate taxes.

• Metro SHS: Covers 3 counties (Multnomah, Washington, Clackamas).
• Preschool for All: Covers ONLY Multnomah County.
• Warning: If you live in Multnomah County (e.g., Portland or Gresham), you likely owe BOTH.

Deep Dive: Confused about which taxes apply to you? Check out my Complete Guide to Portland Business Taxes for a full comparison table.

Is the Metro SHS tax deductible? For the Business portion (if revenue > $5M), yes, it is a business expense. For the Personal portion (on your 1040), it falls under the “State and Local Tax” (SALT) deduction itemized on your Federal return, which is currently capped. Ask your CPA for your specific situation.

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Stop Guessing Your Tax Bill

If your income is near the $200k mark, the math on Metro SHS and Preschool for All can get complicated fast. Don’t wait until April 14th to find out you owe thousands in unexpected local taxes.

At Bridgetown Bookkeeping, we help independent contractors and business owners forecast their tax liability quarterly so there are no surprises.