Is There Income Tax in Idaho and Who Needs to File?

Idaho has a state income tax that applies to individuals who meet specific filing requirements. Whether you need to file depends on residency status, income level, and types of earnings. Understanding these rules ensures compliance and helps avoid penalties.

State taxes affect how much residents owe and what deductions or credits they may qualify for. Idaho’s tax system includes defined rates, exemptions, and credits that determine tax liability. Knowing how these apply to your situation is essential before filing.

Who Needs to File

Idaho requires individuals to file a state income tax return if their gross income exceeds certain thresholds, which vary by filing status and age. For 2024, single filers under 65 must file if their income is at least $13,850, while married couples filing jointly must do so if their combined income reaches $27,700. These thresholds align with the federal standard deduction, meaning those required to file a federal return typically need to file an Idaho return as well.

Residents working in another state but maintaining Idaho as their primary home must report all income, regardless of where it was earned. Part-year residents—those who moved into or out of Idaho during the year—must file if they earned at least $2,500 from Idaho sources. Nonresidents with Idaho-based employment, rental properties, or business activities may also have a filing obligation, depending on earnings.

Some taxpayers must file even if their income falls below the standard threshold. This includes individuals who had Idaho income tax withheld and want a refund, as well as those who owe special taxes, such as the use tax on untaxed online purchases. Self-employed individuals with net earnings of $400 or more must also file.

Determining Residency

Idaho classifies taxpayers as residents, part-year residents, or nonresidents, each with different tax obligations. Residency is primarily based on domicile—the place a person considers their permanent home. Factors such as an Idaho driver’s license, voter registration, or owning a primary residence in the state help establish domicile.

Spending significant time in Idaho can also determine residency. The state applies the 270-day rule, meaning individuals who maintain a home in Idaho and spend more than 270 days there during the tax year are considered residents, regardless of where they claim domicile. Temporary absences, such as extended travel or work assignments elsewhere, do not necessarily change residency if Idaho ties are maintained.

For those splitting time between states, Idaho assesses residency based on connections such as financial accounts, family location, and property ownership. Military personnel stationed in Idaho are generally not considered residents unless they take steps to establish domicile. Conversely, Idaho residents serving in the military outside the state remain taxable on all income unless they establish a new domicile.

Income Sources Subject to Tax

Idaho taxes wages, salaries, tips, and commissions earned by residents and those working in the state. Compensation from an employer, including bonuses, is fully taxable. Freelance earnings and independent contractor payments must also be reported, even if no taxes were withheld. Income from side jobs, gig work, and self-employment is subject to Idaho tax, and individuals in these categories may need to make estimated tax payments to avoid penalties.

Unearned income, such as interest, dividends, and capital gains, is also taxable. Interest from bank accounts, certificates of deposit (CDs), and bonds is subject to tax, except for interest earned on certain municipal bonds issued by Idaho. Dividends from stocks and mutual funds must be reported, and capital gains on the sale of investments, real estate, or other assets are taxable. Idaho offers a capital gains deduction of up to 60% for qualifying assets held for at least 12 months, including Idaho-based real property and certain business assets.

Retirement income is taxed, though some exemptions apply. Social Security benefits are not taxed at the state level, but withdrawals from 401(k) plans, pensions, and traditional IRAs are fully taxable. Idaho provides a retirement benefits deduction for public pensions, including those from the federal civil service, military, and specific state retirement systems, but private pensions and non-government retirement plans do not qualify.

Rental income from Idaho properties must be reported, even if the owner resides elsewhere. Landlords must declare rental payments received but can deduct related expenses such as mortgage interest, property taxes, maintenance costs, and depreciation. Business owners operating in Idaho must report all profits, whether from a sole proprietorship, partnership, or S corporation. Pass-through income from these entities is taxable at the individual level, while corporate income is taxed separately.

Tax Rates and Brackets

As of 2024, Idaho imposes a flat individual income tax rate of 5.8%, replacing the previous graduated bracket system. This means all taxable income is subject to the same rate, simplifying tax calculations.

The state’s tax base is derived from federal adjusted gross income (AGI), with modifications specific to Idaho law. Taxable income is determined after applying any subtractions or additions required by state regulations, such as adjustments for certain business expenses or retirement income exclusions. Once AGI is adjusted, the 5.8% rate is applied uniformly.

Withholding tables and estimated tax payment requirements reflect this flat rate. Employers must withhold state income tax at the appropriate percentage, while self-employed individuals and those with additional income sources must ensure they remit estimated payments quarterly. Failure to withhold or pay estimated taxes can result in penalties, calculated based on the underpayment amount and the duration of non-compliance.

Credits and Deductions

Idaho offers various tax credits and deductions that can reduce the amount owed or increase a potential refund.

Standard and Itemized Deductions

Taxpayers can take Idaho’s standard deduction, which matches federal amounts, or itemize deductions if their eligible expenses exceed the standard amount. Common itemized deductions include mortgage interest, medical expenses exceeding 7.5% of AGI, and charitable contributions. State and local taxes paid, including property taxes, may also be deductible, though Idaho limits the deduction for state income taxes.

Available Tax Credits

Idaho provides several credits, including the Grocery Credit, which helps offset sales tax paid on food purchases. This credit is available to all full-year residents, with higher amounts for seniors. The Child Tax Credit offers additional relief for families with dependents, while the Credit for Taxes Paid to Other States prevents double taxation for those earning income outside Idaho. Business owners and investors may qualify for credits such as the Investment Tax Credit, which applies to certain equipment purchases, and the Research Activities Credit, designed to encourage innovation within the state.

Filing Process

Idaho taxpayers can file electronically or by paper, with electronic filing being the preferred method due to faster processing and reduced errors. The Idaho State Tax Commission provides free filing options for eligible individuals through partnerships with tax software providers, while others can use commercial tax preparation services or file directly through the state’s online portal.

Returns are due by April 15, though extensions are available. An extension grants six extra months to file but does not extend the deadline for paying any taxes owed. Taxpayers who anticipate owing should estimate their liability and submit a payment by the original due date to avoid interest and penalties. Refunds are typically issued within a few weeks for electronic filers, while paper returns take longer to process.

Penalties for Non-Compliance

Failing to file or pay Idaho income taxes on time can result in financial penalties and interest charges. The state imposes a late filing penalty of 5% of the unpaid tax per month, up to a maximum of 25%. If a return is not filed within a year of the due date, Idaho may assess additional penalties and take enforcement actions such as wage garnishments or bank levies.

Interest accrues on unpaid balances from the original due date until the amount is paid in full. The interest rate is adjusted annually and compounds daily. Taxpayers who underpay estimated taxes may also face penalties unless they qualify for an exemption, such as having paid at least 100% of the prior year’s tax liability. In cases of fraud or intentional evasion, Idaho can impose additional civil and criminal penalties, including substantial fines and potential prosecution.