Bottom Line
Middle-Class Families: Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
At first blush, the Gem State might not look like a tax-friendly state. Idaho's current top income tax rate of 6% kicks in at a fairly low amount, making the tax hit feel more like that of a coastal state.
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But, if you dig a little deeper, you'll see some good news on taxes. Starting in 2023, a new, lower flat income tax rate applies. And sales taxes aren't too bad, either. Plus, since groceries are taxable, the state offers a tax credit of $100 per person to offset the sales tax on them ($120 if you're over 65). The state's median property tax rate is well below average, too. And to top things off, Idaho doesn't have an estate tax or inheritance tax.
Plus, Idaho is sending a second round of tax rebates to eligible residents this year – payments began in September 2022 (the first-round payments went out in March 2022). Rebate payments will be processed through 2022 and into 2023 as residents file the required tax returns.
Idaho Income Taxes
Idaho Income Tax Range
Low: 1% (on taxable income up to $3,176 for married joint filers and up to $1,588 for individual filers)
High: 6.5% (on taxable income of $15,878 or more for married joint filers and $7,939 or more for individual filers)
Starting in 2022, the top rate is reduced to 6% (taxable income thresholds for 2022 have not been released yet).
Beginning in 2023, a flat rate of 5.8% on taxable income over $2,500 ($5,000 for joint filers) will apply. The threshold will be adjusted annually for inflation after 2023.
Idaho Taxation of Social Security Benefits
Social Security benefits are not taxed by the state.
Idaho Tax Breaks for Other Retirement Income
For the 2021 tax year, taxpayers age 65 and older can exclude up to $37,776 of income from qualified retirement plans. Joint filers can exclude up to $56,664. (Amounts for 2022 are not available yet.) 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.
In addition, the grocery credit is increased by $20 (to $120) for Idaho residents age 65 or older (increased to $140 beginning in 2023).
Idaho 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: Taxable
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Idaho Real Property Taxes
In Idaho, the median property tax rate is $659 per $100,000 of assessed home value.
Idaho Property Tax Breaks for Retirees
For 2022, homeowners age 65 or older with income of $32,230 or less are eligible for a property tax reduction of up to $1,500.
In addition, residents 65 or older with income of $50,650 or less in 2021 can defer 2022 property tax payments.
Idaho Motor Fuel Taxes
Gasoline: 33¢ per gallon.
Diesel: 33¢ per gallon.
Idaho Sin Taxes
Cigarettes: $0.57 per pack
Other tobacco products: taxed at 40% of wholesale sales price
Beer: $0.15 per gallon if 5% or less alcohol by volume; $0.45 per gallon if over 5% alcohol by volume
Wine: $0.45 per gallon
Liquor: $10.91 per gallon (the liquor tax is an estimate by the Distilled Spirits Council of the United States and published by the Tax Foundation)
Idaho Estate and Inheritance Taxes
No estate or inheritance tax.
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