Idaho Retirement Tax Friendliness

Idaho Retirement Taxes

This mountainous western state has a lot to offer retirees, including breathtaking scenery, a low cost of living and some of the country’s best skiing. When it comes to retirement taxes, however, Idaho is a mixed bag.

The good news is that Idaho doesn’t tax Social Security income at the state level. Additionally, the state’s property and sales taxes are relatively low. The bad news is that other forms of retirement income are taxed at a flat rate of 5.8%. However, the state does exempt the first $4,489 in income for individuals and $8,978 for married couples filing jointly. So, depending on your primary income source and level of income, Idaho may or may not be great for you.

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Is Idaho tax-friendly for retirees?

Idaho is generally a tax-friendly state for retirees, but whether that’s true for you will depend on your specific circumstances. Seniors who intend to rely mostly on Social Security will find Idaho tax-friendly, as the state does not tax Social Security and has low property and sales taxes. On the other hand, seniors who will be receiving significant income from retirement savings accounts like an IRA may find Idaho’s tax system to be less agreeable.

Is Social Security taxable in Idaho?

Social Security income is entirely tax-exempt from the Idaho state income tax. In order to exempt your Social Security income, you will need to attach Form 39R to your Form 40.

Are other forms of retirement income taxable in Idaho?

Income from retirement savings accounts, including 401(k) accounts and IRAs, may be subject to the state's 5.8% income tax. Income from a private sector pension is also fully taxable, but income from public pensions may qualify for a deduction for taxpayers age 65 and older or anyone who's at least 62 and is disabled. However, that deduction is reduced by an amount equal to the amount of the taxpayer’s Social Security income.

How high are property taxes in Idaho?

Property tax rates in Idaho are relatively low. The state’s median effective rate is 0.63%, well below the U.S. median rate of 1.01%. That means a typical Idaho homeowner can expect to pay about $1,682 in annual property taxes.

What is the Idaho property tax reduction?

Also called the “circuit breaker,” the Idaho property tax reduction lowers the total property tax bill for Idaho homeowners who meet certain criteria. Seniors who are age 65 or older qualify for this deduction if they own and live in their home and had 2023 income of less than $37,000. The circuit breaker reduces taxes by up to $1,500 on a home with no more than one acre of property.

How high are sales taxes in Idaho?

While the statewide sales tax rate is relatively high at 6%, only a handful of cities charge a local sales tax. Thus, you can expect to pay 6% in sales taxes unless you go to a handful of cities popular with tourists, including Stanley and Sun Valley.

What other Idaho taxes should I be concerned about?

There's really nothing else to worry about in Idaho. The Gem State has no estate or inheritance tax, so unless your estate qualifies for the federal estate tax (the exemption threshold is $12.92 million for 20223and $13.61 million for 2024), you don’t need to worry about this.