Is Social Security Taxed in Idaho? Tax Rules and Exemptions Explained

Social Security benefits are a key source of income for many retirees, but taxation depends on both federal and state rules. Some states fully exempt these benefits, while others follow federal guidelines or have their own policies. Understanding Idaho’s approach helps residents plan their retirement finances effectively.

Federal vs. Idaho Rules

At the federal level, Social Security benefits may be taxable depending on total combined income. The IRS calculates this by adding adjusted gross income (AGI), nontaxable interest, and half of Social Security benefits. If this total exceeds $25,000 for single filers or $32,000 for married couples filing jointly, a portion of benefits becomes taxable—up to 50% for moderate incomes and as much as 85% for higher incomes. These thresholds have remained unchanged for decades, increasing the number of retirees subject to taxation.

Idaho does not tax Social Security benefits, regardless of income. While the state taxes other retirement income, such as pensions and withdrawals from traditional IRAs or 401(k) plans, Social Security remains exempt. This policy provides retirees with a financial advantage over those in states that impose partial or full taxation on these benefits.

Determining Taxable Portion

The taxable portion of Social Security benefits at the federal level depends on total income from all sources. Withdrawals from traditional IRAs and 401(k) plans count as taxable income and can increase the portion of Social Security subject to tax.

If a retiree’s combined income stays below the federal threshold, Social Security benefits remain untaxed. Once income surpasses that point, up to 50% of benefits become taxable, and if it climbs higher, as much as 85% is included in taxable income. This does not mean 85% of benefits are taken in taxes—only that this portion is subject to the filer’s applicable tax rate.

Managing withdrawals from tax-deferred accounts can help control taxable income. Roth IRA distributions do not count toward combined income, so converting assets to a Roth before claiming Social Security can reduce tax exposure. Spreading withdrawals over multiple years can also help retirees avoid higher tax brackets.

Potential Exclusions

Certain deductions and credits can reduce or eliminate taxation on Social Security benefits. The standard deduction offsets taxable income, and in 2024, it is $14,600 for single filers and $29,200 for married couples filing jointly, with additional amounts for those over 65. If a retiree’s total taxable income, including any portion of Social Security that is subject to tax, remains below these levels, they may owe little to no federal income tax.

The Credit for the Elderly or the Disabled is available to low-income individuals over 65, though strict income limits mean few retirees qualify. The Saver’s Credit, which encourages retirement savings, can apply if a retiree contributes to an IRA or employer-sponsored plan, further lowering taxable income.

Medical expenses exceeding 7.5% of adjusted gross income can also reduce taxable income. Deductible expenses include Medicare premiums, long-term care insurance, and out-of-pocket medical costs. Since retirees often have higher healthcare expenses, these deductions can help lower overall tax liability.

When Other Retirement Income Affects Taxation

Withdrawals from traditional IRAs, 401(k) plans, and pensions are taxable at both the federal and state levels in Idaho. The timing and amount of these distributions can influence a retiree’s tax bracket and the taxation of Social Security benefits.

Required Minimum Distributions (RMDs) begin at age 73 and must be taken annually from tax-deferred retirement accounts. These mandatory withdrawals increase taxable income and can push retirees into higher tax brackets. They can also raise Medicare premiums due to the Income-Related Monthly Adjustment Amount (IRMAA).

Strategic planning can help manage tax exposure. Withdrawing smaller amounts before RMDs begin can spread taxable income over more years, preventing large spikes in tax liability. Converting portions of traditional retirement accounts to Roth IRAs before claiming Social Security can also reduce taxable income in later years.