State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees. Go to Retiree Tax Map Idaho Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Tax-Friendly At first blush, the Gem State might not look like a tax-friendly state for retirees. Idaho taxes all income, except Social Security and Railroad Retirement benefits, and its top tax rate of 6.5% kicks in at a relatively low level. While there is a generous retirement-benefits deduction, it's only available to retirees with qualifying public pensions.But, if you dig a little deeper, retirees will see some good news on taxes. Sales taxes aren't too bad…and since groceries are taxable, the state offers a tax credit of $100 per person to offset these—and raises it to $120 if you're over 65. The state's median property tax rate is well below average, too. Plus, Idaho doesn't have an estate tax or inheritance tax. Income Tax Range Low: 1.125% (on taxable income up to $3,136 for married joint filers and up to $1,568 for individual filers)High: 6.925% (on taxable income of $23,520 or more for married joint filers and $11,760 or more for individual filers)Starting in 2021, the lowest rate is 1% and the highest rate is 6.5%. Taxation of Social Security Benefits Social Security benefits are not taxed by the state. Tax Breaks for Other Retirement Income Taxpayers age 65 and older can exclude up to $36,132 of income (2020 amount) from qualified retirement plans. Joint filers can exclude up to $54,198 (2020 amount). The deduction is reduced by Social Security and Railroad Retirement benefits, which are also exempt from tax. Eligible plans include federal government, Idaho police and firefighter, and military retirement plans. Sales Tax 6% state levy. Localities (typically resort communities) can add as much as 3%, but the average combined rate is just 6.02%, according to the Tax Foundation.Groceries: TaxableClothing: TaxableMotor Vehicles: TaxablePrescription Drugs: Exempt Real Property Taxes Homeowners age 65 or older with income of $31,900 or less are eligible for a property tax reduction of up to $1,500.In addition, residents 65 or older with income of $50,000 or less in 2021 can defer property tax payments. Annual Car Taxes and Fees An annual vehicle registration fee based on the car's age and county of residence is imposed. Estate and Inheritance Taxes No estate or inheritance tax.