Idaho reformed its income tax in 2022 (HB 436): from seven graduated brackets with a 6.925% top rate to a simplified flat 5.8% rate (with a small exempt amount at the bottom). Social Security is fully exempt. Idaho provides a substantial retirement income deduction for residents age 65+ ($47,935 single / $95,870 married). Military retirement pay is taxable in Idaho — one of the fewer states that does not fully exempt it. Idaho's property tax is low (~0.63%) and there is no Idaho estate or inheritance tax. Moving to Nevada or Wyoming eliminates Idaho's 5.8% income tax.
At a glance
Key Facts
Idaho Income Tax Rate (2022 Reform)
Flat 5.8% on income above $2,500 single / $5,000 married filing jointly (2024). Reformed by HB 436 (2022) from seven brackets with a 6.925% top rate. The 5.8% flat structure was further refined in 2023 (HB 1 special session) to 5.695% for some bracket thresholds — Idaho's effective flat rate is approximately 5.695–5.8% depending on filing status and income level.
Social Security
Idaho does NOT tax Social Security benefits — 100% exempt at all income levels.
Retirement Income Deduction (Age 65+)
Idaho provides a substantial retirement income deduction for taxpayers age 65+: $47,935 (single) or $95,870 (married filing jointly) of qualifying retirement income can be deducted. Qualifying income includes pension, IRA distributions, 401(k) distributions, and annuity income. This effectively makes Idaho tax-free for many retirees with moderate retirement incomes.
Military Retirement
Idaho taxes military retirement pay at the regular 5.8% flat rate. Idaho is in the minority of states that do NOT fully exempt military retirement — a notable disadvantage for veterans compared to neighboring Montana (fully exempt) or Nevada (no income tax). Idaho passed HB 304 (2022) providing a $4,000 annual military retirement deduction as a partial offset.
No Estate or Inheritance Tax
Idaho has no state estate tax and no state inheritance tax.
Property Tax
Idaho property tax effective rate approximately 0.63% — well below the national average. Idaho's property tax burden has become a growing concern as Boise-area home values have surged. Circuit breaker credit available for low-income elderly and disabled homeowners. Homeowner exemption reduces assessed value of owner-occupied homes.
Sales Tax
Idaho 6% state sales tax. Food for home consumption is exempt from Idaho sales tax — a meaningful benefit for lower-income households. No local sales tax in most Idaho cities (Boise, Nampa, etc.).
Introduction
Idaho's 2022 income tax reform (HB 436) was one of the most significant state tax simplifications in recent years, collapsing seven brackets into a single flat rate and cutting the top rate from 6.925% to 5.8%. The reform made Idaho meaningfully more competitive with neighboring Nevada (no income tax) and Montana (5.9% — slightly higher). Idaho's low property taxes (~0.63%), no estate tax, and low cost of living outside of Boise make it an overall moderate-tax state. The notable exception: Idaho taxes military retirement pay, unlike the majority of states. This guide covers what Idaho residents considering a move need to know.
Section 01
Idaho's 2022 Tax Reform and Current Competitiveness
Idaho HB 436 (signed by Governor Brad Little, 2022) was a landmark simplification that made Idaho significantly more competitive with neighboring states.
Before and After Reform
Before HB 436, Idaho had seven income tax brackets ranging from 1% to 6.925%. The reform collapsed these into a single 5.8% flat rate (with the first $2,500/$5,000 exempt). Combined with HB 1 (2023 special session) which provided additional rate refinements, Idaho's effective top rate is approximately 5.695–5.8%.
Idaho vs Nevada and Wyoming
For a single Idahoan earning $100,000: Idaho income tax ~$5,655 (5.8% less exempt). Nevada income tax: $0. Wyoming income tax: $0. Annual income tax savings by moving to Nevada or Wyoming: ~$5,655. Against Idaho's low cost of living (especially outside Boise), low property tax, and no estate tax, the financial case for leaving Idaho is meaningful but not dramatic for most middle-income residents. The strongest case: high earners with significant investment income or business income (capital gains taxed at the same 5.8% flat rate in Idaho).
Boise's Growth and Property Tax Pressure
Boise became one of the fastest-growing metros in the US through 2020–2023, with home values roughly doubling. Even at Idaho's low 0.63% effective rate, rising assessed values have pushed nominal property tax bills up significantly. The Idaho legislature has periodically provided homeowner relief but has not fundamentally reformed the property tax structure. For Boise homeowners, property tax is increasingly a material budget item despite the low effective rate.
Military Retirees: Idaho vs Neighbors
Idaho's taxation of military retirement is a meaningful disadvantage vs most neighboring states. Montana fully exempts military retirement. Nevada has no income tax. Wyoming has no income tax. For a military retiree receiving $50,000/year in military retirement pay: Idaho tax ~$2,900 annually. The $4,000 HB 304 deduction provides only ~$232 in actual tax savings. Veterans in the Boise, Nampa, and Pocatello areas often cite this as a reason to consider Nevada (no income tax) for retirement.
Section 02
Idaho Residency Exit Rules
Idaho uses domicile-based residency with a 270-day (9-month) alternative test:
Idaho Residency Definition
Idaho defines a resident as someone domiciled in Idaho, or a non-domiciliary who maintains a home in Idaho and is present in Idaho for more than 270 days during the tax year. The 270-day test is higher than the more common 183-day standard, giving part-time residents more flexibility. To exit Idaho residency: establish domicile in the new state (driver's license, voter registration, primary home), change vehicle registration, update estate documents. Idaho does not have an aggressive post-departure audit reputation.
Part-Year Returns
In your departure year, file Idaho Form 43 (part-year resident return) covering income earned during Idaho residency. Idaho-source income after departure (Idaho rental income, Idaho business income) remains taxable as non-resident income. Idaho's low 0.63% property tax on any retained Idaho real estate is a modest ongoing obligation.
Idaho domicile changes, military retirement deduction planning, part-year residency returns, and Boise-area property tax questions require CPA guidance. TaxHub connects you with state tax specialists.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Does Idaho's $47,935 retirement deduction cover IRA and 401(k) distributions?
Yes — Idaho's retirement income deduction (up to $47,935 single / $95,870 married for taxpayers age 65+) applies to qualifying retirement income including IRA distributions, 401(k) and 403(b) distributions, pension income, and annuity income from qualified retirement plans. For a single retiree age 65+ with $47,935 or less in retirement income: Idaho income tax is $0. For a married couple with $95,870 or less: $0 Idaho income tax on that retirement income. Social Security is separately exempt. This makes Idaho effectively a zero-income-tax retirement state for residents with moderate retirement income — a major advantage over many states that tax retirement income at full rates.
Q
Why does Idaho still tax military retirement when most states don't?
As of 2026, approximately 38 states fully exempt military retirement pay. Idaho is among the minority that does not provide a full exemption. Idaho passed HB 304 (2022) providing a $4,000 military retirement deduction as a partial offset, but this is far less than a full exemption. Legislative efforts to fully exempt military retirement have been introduced in the Idaho Legislature but have not passed due to revenue concerns. The partial $4,000 deduction provides approximately $232 in annual tax savings — modest compared to the full liability. Veterans groups have consistently advocated for full exemption, citing competition with Nevada, Wyoming, and Montana (which all effectively provide zero or full exemption).
Q
How does Idaho compare to Montana for overall tax burden?
Idaho (5.8% flat) vs Montana (4.7%/5.9% two-bracket, post-SB 399 reform): Montana's top rate is slightly higher (5.9%) but its lower bracket (4.7% on income up to $20,500) means lower-income Idahoans may pay more than comparable Montana residents. Montana has no sales tax (Idaho has 6%). Montana fully exempts military retirement (Idaho does not). Montana has a 2% capital gains credit (effective 3.9% rate on capital gains vs Idaho's full 5.8%). Montana's property tax (~0.74%) is slightly higher than Idaho (~0.63%). Overall: Idaho and Montana are very similar in total tax burden. Idaho has a slight property tax advantage; Montana has no sales tax and better treatment for military retirees and investors with capital gains.
Disclaimer:This guide provides general tax information for educational purposes only. Idaho income tax rates and retirement deduction thresholds are subject to legislative change. This is not tax advice. Consult a CPA for Idaho-specific tax planning.