Idaho vs. California Taxes: A Detailed Comparison

State tax policies significantly shape the financial landscape for individuals and businesses. California and Idaho employ distinct philosophies toward generating revenue, creating different liabilities and benefits that impact take-home pay and corporate bottom lines. The financial consequences of residing or operating in one state over the other can be substantial, influencing major life decisions.

Comparing Individual Income Taxes

California employs a progressive income tax system, meaning the tax rate increases as income rises. The state has numerous tax brackets, starting at 1% for the lowest earners and climbing to a top marginal rate of 13.3% for those with income over $1 million. This structure is supplemented by an additional 1.1% payroll tax for State Disability Insurance, up to a certain wage limit.

In contrast, Idaho utilizes a flat tax system. All taxable income is subject to a single rate of 5.3%, which became effective retroactively to the start of 2024. This simplifies tax calculations for residents, as the same rate applies regardless of total income.

The standard deduction amounts also differ significantly. For the 2024 tax year, California offers a standard deduction of $5,540 for single filers and $11,080 for married couples filing jointly. Idaho provides a more generous standard deduction of $14,600 for single individuals and $29,200 for married couples filing jointly.

Both states exempt Social Security benefits from state income tax. However, other forms of retirement income, such as from pensions, 401(k)s, and IRAs, are taxed as ordinary income in both California and Idaho.

Contrasting Sales and Use Taxes

California’s statewide base sales tax rate is 7.25%. This rate is a combination of a 6% state rate and a mandatory 1.25% local rate that is uniform across all counties. The complexity in California’s system arises from district-level sales taxes. Cities, counties, and special districts can levy additional taxes, which can push the total sales tax rate much higher. In some municipalities, the combined state and local sales tax rate can exceed 10%.

Idaho maintains a simpler structure with a statewide sales tax rate of 6%. While some resort cities and auditorium districts are permitted to add a local sales tax, these are not widespread. For most of the state, consumers will pay the flat 6% rate on taxable goods and services. The total sales tax in areas with local add-ons can reach up to 9%.

The tax base also shows important differences, particularly in the treatment of groceries. In California, most grocery food items are exempt from sales tax. The tax applies only to hot prepared foods and items sold for consumption on-premises. Conversely, Idaho taxes groceries at its full 6% state sales tax rate. To help offset this cost for residents, the state offers a grocery tax credit of $120 per person, with a higher credit of $140 for those 65 and older. Both states provide exemptions for prescription drugs and certain medical devices.

Analyzing Property Taxes

The methodologies for assessing and taxing real property in California and Idaho are fundamentally different. California’s system is governed by Proposition 13, passed in 1978. This law established an acquisition-value based system, where a property’s assessed value for tax purposes is set at its purchase price.

Under Proposition 13, the assessed value can only increase by a maximum of 2% per year, regardless of how much the property’s actual market value has appreciated. The property is only reassessed to its current market value when it is sold or undergoes new construction. This system provides predictability for long-time homeowners but can create significant disparities in taxes paid by neighbors with similar homes purchased at different times.

Idaho operates on a market-value assessment system, meaning that properties are assessed annually based on their current market value. This approach keeps tax assessments aligned with prevailing real estate conditions, but it can also lead to significant increases in property tax bills during periods of rapid home price appreciation.

The average effective property tax rate is lower in California than in Idaho, largely due to the assessment caps of Proposition 13. Both states offer a primary residence exemption. In California, the Homeowners’ Exemption reduces the assessed value of a principal residence by $7,000. Idaho’s Homeowner’s Exemption is more substantial, reducing the assessed value of a primary residence by 50%, up to a maximum reduction of $125,000.

Examining Business Tax Structures

California imposes a corporate income tax at a flat rate of 8.84% on net income. A defining feature of California’s business tax system is its annual minimum franchise tax. Nearly every corporation, S corporation, and LLC doing business in California must pay a minimum franchise tax of $800 each year. This tax is due regardless of whether the business is profitable or inactive. For new corporations, this minimum tax is waived for the first year of operation.

Idaho’s corporate tax structure is more straightforward. The state levies a corporate income tax at the same 5.3% flat rate as its individual income tax. Unlike California, Idaho does not impose a minimum franchise tax on most corporations, though there is a small $20 minimum tax. This can make the state more attractive for startups and small businesses.

The treatment of pass-through entities, such as S corporations and LLCs, also differs. In Idaho, income from these entities is passed through to the owners and taxed at their individual income tax rate. In California, S corporations are subject to a 1.5% tax on their net income, in addition to the $800 minimum franchise tax. LLCs in California pay the $800 annual tax and may also be subject to an additional fee based on their total annual revenue.

Other Notable Tax Distinctions

Beyond the major tax categories, several other distinctions in tax policy between Idaho and California can have a financial impact. These differences affect specific activities and financial decisions.

Capital Gains

The treatment of profits from the sale of assets like stocks or real estate varies significantly. California taxes capital gains as ordinary income. This means that both short-term and long-term capital gains are subject to the state’s progressive income tax rates, which can reach a top marginal rate of 13.3%.

Idaho also taxes capital gains as income at its flat tax rate. However, the state offers a 60% deduction for net capital gains from the sale of qualifying Idaho-based property, such as real estate or tangible personal property used in a business that has been held for at least one year.

Gasoline Taxes

A difference for drivers is the tax levied on gasoline. California consistently has one of the highest state gasoline excise taxes in the nation. As of June 2025, the state excise tax on gasoline is $0.596 per gallon.

Idaho’s gasoline tax is considerably lower. The state excise tax is set at $0.33 per gallon. This difference in per-gallon tax directly affects transportation costs for both individuals and businesses.

Estate and Inheritance Taxes

Neither Idaho nor California imposes a state-level estate tax, which is a tax on the transfer of property after death. Additionally, neither state has an inheritance tax, which is a tax paid by those who receive property from a deceased person.