Idaho has a state income tax, and it applies to most types of income you earn

Yes. Idaho taxes ordinary income — wages, self-employment earnings, interest, dividends, and retirement distributions — at rates that range from 1% to 5.8%, depending on your total income. The state also taxes capital gains (profit from selling assets) at the same rates as ordinary income, which is different from how the federal government treats them.

Idaho does not have a sales tax on groceries, but it does tax most other purchases at 6%, plus any local sales tax your county or city adds on top. Property tax exists and varies by county. The state also taxes certain business income and has specific rules for how it treats income earned outside Idaho.

If you work in Idaho, live in Idaho, or receive income from Idaho sources, you will owe state tax on that income unless a specific exemption applies. If you live in another state but work in Idaho, you may owe tax to both states — though Idaho offers a credit to prevent you from paying twice on the same dollar.

Key Takeaways

  • Idaho's income tax rates range from 1% to 5.8% and explore to wages, self-employment income, interest, dividends, and retirement withdrawals.
  • Capital gains are taxed at the same rate as ordinary income in Idaho, unlike the federal system which has lower rates for long-term gains.
  • Idaho does not tax groceries but taxes most other goods at 6% state sales tax, plus any local additions.
  • If you live in Idaho, you owe state income tax on all income sources; if you live elsewhere but work in Idaho, you may owe tax to both states.

How Idaho's income tax brackets work

Idaho uses a progressive tax system, meaning the rate increases as your income rises. You do not pay one flat rate on all your income; instead, each portion of your income is taxed at the rate for that bracket. For example, if you are single and earn $50,000, the first portion of that income is taxed at 1%, then 3%, then 4.5%, and so on, until you reach your top bracket.

The exact brackets change each year because Idaho adjusts them for inflation. The state publishes updated brackets in January on the Idaho State Tax Commission website. Your filing status — single, married filing jointly, head of household — determines which bracket applies to you. A married couple filing jointly reaches higher income levels before moving to the next bracket than a single filer does.

The top rate of 5.8% applies only to income above a certain threshold, which varies by filing status and year. Most wage earners in Idaho pay somewhere between 2% and 5% of their income to the state, depending on how much they earn.

What types of income Idaho taxes

Idaho taxes W-2 wages from an employer, self-employment income from a business or freelance work, interest from savings accounts and bonds, and dividends from stocks. It also taxes capital gains — the profit you make when you sell an asset for more than you paid for it. Unlike the federal government, Idaho does not give capital gains a lower rate; they are taxed at the same brackets as ordinary income.

Retirement income is taxable in Idaho. Distributions from a traditional IRA or 401(k) are taxed as ordinary income. Social Security benefits are not taxed by Idaho, even though they are taxed by the federal government. Pension income from a government employer (such as a teacher's pension) may have special treatment; check with the Idaho State Tax Commission if you receive a government pension.

Some income is exempt. Gifts and inheritances are not taxed. Workers' compensation is not taxed. Certain scholarships and educational grants are not taxed if they pay for tuition and required fees.

Sales tax and property tax in Idaho

Idaho's state sales tax is 6% on most goods and services. Groceries — unprepared food you buy to cook at home — are exempt. Restaurant meals, prepared foods, and food bought for when ready consumption are taxed. Prescription medications are not taxed, but over-the-counter drugs are.

Many Idaho counties and cities add a local sales tax on top of the state rate. Your total sales tax can range from 6% to over 8%, depending on where you live. When you buy something, the tax is included in the price shown at checkout.

Property tax in Idaho is assessed by county and varies widely. The state does not set a uniform rate. If you own real estate or a vehicle in Idaho, you will receive a property tax bill from your county assessor. Homeowners may be able to claim a homeowner's exemption, which lowers the assessed value of a primary residence; the rules and amounts vary by county.

How Idaho taxes income earned outside the state

If you live in Idaho but earn income from another state, Idaho generally taxes that income. For example, if you work remotely for a company in California, Idaho taxes your wages. If you own rental property in another state, Idaho taxes the rental income.

However, if you also owe tax to the other state on that same income, Idaho offers a tax credit to reduce double taxation. The credit is limited to the lesser of the tax you paid to the other state or the Idaho tax on that income. This prevents you from paying the full rate to both states, but it does not eliminate all overlap.

If you live outside Idaho but work in Idaho, you owe Idaho income tax on your wages. You may also owe tax to your home state. Again, most states offer a credit to prevent double taxation, but the rules vary by state. Check with your home state's tax authority about how they treat income earned in Idaho.

Filing requirements and important date in Idaho

You must file an Idaho state tax return if your income exceeds a certain threshold. The threshold depends on your filing status and age. For 2024, a single person under 65 must file if their income is over $14,600; a married couple filing jointly must file if their combined income is over $29,200. These thresholds increase slightly each year for inflation.

Idaho uses the same tax year as the federal government: January 1 through December 31. Your return is due on April 15 of the following year, the same important date as your federal return. If you file your federal return late or request an extension, the same extension applies to your Idaho return.

You file using Form 40, the Idaho Individual Income Tax Return. You can file by mail or electronically through the Idaho State Tax Commission website. If you use tax software, it usually handles both your federal and Idaho returns in one process.

Deductions and credits available to Idaho taxpayers

Idaho allows you to claim either the standard deduction or itemized deductions, similar to the federal system. The standard deduction amount varies by filing status and age. For 2024, a single person under 65 can claim a standard deduction of $14,600; a married couple filing jointly can claim $29,200. These amounts are adjusted annually.

If you itemize deductions instead, you can deduct state and local taxes (SALT), mortgage interest, charitable contributions, and certain medical expenses, subject to the same federal limits. Many Idaho taxpayers use the standard deduction because it is simpler and often results in a larger deduction than itemizing.

Idaho offers several tax credits that reduce your tax dollar-for-dollar. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers. The Child and Dependent Care Credit helps pay for childcare expenses. The Residential Energy Credit applies if you install certain energy-efficient improvements to your home. Check the Idaho State Tax Commission website to see which credits match your situation.

Frequently Asked Questions

Do I have to pay Idaho state tax if I just moved there?

You owe Idaho tax on income earned after you become a resident. If you moved partway through the year, you report income earned before the move to your previous state and income earned after the move to Idaho. You may file part-year resident returns to both states. Bring documentation of your move date — a lease, utility bill, or driver's license — when you file.

Is Social Security taxed in Idaho?

No. Idaho does not tax Social Security benefits, even if the federal government taxes part of yours. You do not need to report Social Security on your Idaho return. However, other retirement income, such as IRA or 401(k) withdrawals, is taxed by Idaho.

What if I work in Idaho but live in Washington or Oregon?

You owe Idaho income tax on your wages. Washington and Oregon do not have income tax, so you will not owe tax to your home state on that income. Idaho is the only state that gets to tax your wages in this situation. File an Idaho return and claim Idaho residency for tax purposes, even if you live across the border.

Can I deduct federal income tax from my Idaho return?

No. Idaho does not allow you to deduct federal income tax paid. However, you can deduct state and local taxes (SALT) if you itemize deductions on your Idaho return, up to the federal limit of $10,000 per year. This includes Idaho state income tax, property tax, and sales tax (you choose which to deduct).

Do I owe Idaho tax on money I inherited?

No. Inheritances and gifts are not taxed by Idaho or the federal government. However, if the inherited asset later produces income — such as interest from a bank account or dividends from stocks — that income is taxed. The inheritance itself is not.