Washington State has no personal income tax and Oregon has no sales tax, so living in the former while working in the second may seem like the key to a tax-free existence. This is not really the case, but there are still tax benefits for this living and working situation. A very large percentage of the people on the Washington side work in Oregon. They pay both Oregon income tax AND sales tax The same federal income taxes apply to both Oregon and Washington, so you don't receive direct tax benefits for living and working in either place.
I simply reside and work in Washington State because of its lower income taxes than in Oregon, which has no sales taxes. Of course, if you LIVE in Washington, you must file a form with the Washington State Department of Revenue detailing your purchases in Oregon and paying the required sales tax. All interest, rent, dividend, capital gains, or other income derived from business in Washington is exempt from these taxes. Which means that if you lived and paid taxes in Washington State, but did all your shopping in Oregon, you could save yourself a huge tax break by simply traveling between the two states.
Having a lot of speed for retirement would be a good advantage if you want to live on the fast side during your golden years. You can find cheap housing in eastern Washington and on the Olympic Peninsula, but the entire Puget Sound region is more expensive. I have worked in Washington for 10 years and moved back and forth between Oregon and Washington several times (usually for 2 years each) and both have great advantages and disadvantages. Washington is totally against any plan to extend the light rail system north across the Columbia River.
If you live or work in Oregon or Washington, you won't get any tax benefits because you're charged the same federal income tax. You mentioned the financial advantages of living and working in Washington and they are great (I save about 6k a year), but the culture in Vancouver is that of a very generic and conservative suburb, with lower quality houses or cookie-cutter houses with little or no character that are harder to sell and not a very walkable city with the except for the center, which is on the rise. Washington residents, on the other hand, while paying sales taxes, do not pay income taxes and house prices are much lower than their Oregon neighbors. I lived in two of the highest-taxed states in the country so I could cover people who don't work for a living.
Of course, Washington was even part of the former Oregon territory, so these two states are really very close brothers. Unlike other states, Oregon does not collect personal income taxes for work done outside the state, as does Washington, where no income tax is levied. However, if you live or work in Washington and owe federal income tax returns due to Oregon State income taxes, your Oregon State income tax will be deductible.
