If you live in Idaho, you are subject to Idaho state income tax on all your income, including income from outside the state. If you lived in Idaho only part of the year you are subject to tax on all your income from all sources while you lived in Idaho and your income from Idaho sources while you lived outside the state. And if you are a nonresident, you are subject to tax only on sources in Idaho. Idaho residents file Form 40 and part-year and nonresidents file Form 43.
Idaho deductions
Your Idaho taxable income is based on your federal adjusted gross income, but there are some deductions you can claim on your Idaho return. Idaho full-year residents can claim these deductions on Form 39R. Part-year and nonresidents use Form 39NR.
If you had to include a state income tax refund as income on your federal tax return because you claimed a deduction for that tax on a prior year tax return, you can deduct that refund on your Idaho return.
Interest on U.S. Government obligations that you included as income on your federal tax return is exempt from state income tax in Idaho, so you can deduct that amount.
If you installed insulation in your home in Idaho, you can claim a deduction for the cost of the insulation and the labor to install it. The home must have existed, been under construction or had a building permit on or before January 1, 1976. The cost of additional, not replacement insulation is deductible. For purposes of this deduction, insulation includes weather stripping, double-pane windows, storm doors and windows.
If you install an alternative energy device in your Idaho home, such as a solar, wind or geothermal system, a fluid-to-air heat pump with solar or geothermal heating, a natural gas or propane heating unit that replaced a non-certified wood stove, or a wood or pellet stove that meets Environmental Protection Agency requirements, you can claim a deduction for 40% of the cost, up to a maximum deduction of $5,000. Then you can deduct 20% of the cost in each of the next three years, up to a maximum of $5,000 each year.
If you claimed the credit for child and dependent care expenses on your federal return you can claim a deduction on your Idaho return for the amount of the care expenses you paid that qualify for the federal credit.
Any Social Security, Railroad Retirement, or Canadian Social Security benefits you had to include as income on your federal return are exempt from tax in Idaho, so you can deduct that amount.
If you are 65 or older or 62 or older and disabled, you may be able to deduct some of your retirement benefits and annuities on your Idaho return. The retirement benefits that qualify are Civil Service, Idaho firemen, Idaho city policemen, and U.S. military retirement benefits. The maximum amount you can deduct (for 2009) is $41,814 if you are married filing jointly and $27,876 if you file as single.
If you donate technological equipment such as computers or scientific equipment that is not more than five years old to a school, college or university, or a library, you can claim a deduction for the fair market value of the equipment.
If you had a capital gain on the sale of Idaho property, you may be able to claim a deduction for 60% of the capital gain you reported on your federal schedule D. To qualify, you must have held the property for at least 12 months. This includes real property and tangible personal property used in a revenue-producing enterprise, which includes a production, manufacturing, mining or agricultural business; storage, warehousing or selling at wholesale; livestock feedlots; and operating laboratories or other research and testing facilities. Also qualifying are cattle and horses you held at least 24 months, other breeding livestock held for at least 12 months, and timber held at least 24 months. To claim the deduction you must attach Form CG.
If you are on active duty in the U.S. military outside of Idaho for a continuous, uninterrupted period of at least 120 days, your military pay for services outside Idaho are not subject to Idaho tax and you can deduct that amount.
If you adopt a child you can claim a deduction of up to $3,000 for adoption-related legal and medical expenses. Travel expenses do not qualify for the deduction.
You can deduct up to $2,000 ($4,000 for married filing jointly) of contributions to an Idaho medical savings account.
You can deduct up to $4,000, or $8,000 on a joint return, for amounts you contribute to an Idaho college savings program. The account must be set up with Upromise Investments, Inc.
If you maintain a home for a family member, other than yourself or your spouse, who is 65 or older and is developmentally disabled, you can claim a $1,000 deduction. Development disabilities include mental retardation, cerebral palsy, epilepsy, autism, and similar conditions. If you maintained the home for less than the full year you can deduct $83.33 per month.
You can deduct Idaho lottery prizes of less than $600 per prize that you had to include as income on your federal tax return. Lottery winnings from other states do not qualify for this deduction.
Native Americans who are enrolled members of a federally recognized tribe who live and work on a reservation can deduct all the income they earn on a reservation.
You can deduct the premiums you paid for health insurance coverage for yourself, your spouse and dependents, to the extent the premiums are not deducted elsewhere on your Idaho return. If you claimed health insurance costs as part of your itemized deductions for medical expenses, there is a worksheet in the instructions for Form 40 to determine the additional amount you can deduct. If you claimed the Idaho standard deduction you don’t have to reduce the health insurance costs. If you have pretax deductions from your pay for health care coverage through a cafeteria plan, you do not qualify for the deduction. If you voluntarily enroll in Medicare B or D, or if you aren’t covered by Social Security and you voluntarily enroll in Medicare A, you can claim a deduction for your premiums.
You can deduct the premiums you paid for long-term care insurance for yourself, your spouse and dependents to the extent you don’t claim a deduction elsewhere on your return. As in the case of health insurance premiums, if you included long-term care premiums in your itemized deductions, there is a worksheet that will determine the additional amount you can deduct.
If you are self-employed and paid for worker’s compensation insurance coverage in Idaho, you can deduct the premiums if you did not deduct them elsewhere.
Idaho credits
If you paid income tax to another state on income that is included in your Idaho return, you can claim a credit for that tax. The amount of the credit is calculated on Form 39R or 39NR, as applicable, and you must attach a copy of the income tax return you filed with the other state.
If you donated cash or goods to a qualified education entity, a qualified center for independent living, a youth or rehabilitation center, or a nonprofit substance abuse center licensed by the Idaho Department of Health and Welfare, you can claim a credit. The credit is the smaller of half the amount you donated or 20% of your Idaho income tax before credits, up to a maximum credit of $100 on a single return and $200 on a joint return.
If you are a living organ donator, you may qualify for a credit up to $5,000 for unreimbursed expenses such as travel, lodging and lost wages incurred in relation to the donation.
If you are an Idaho resident you can claim the grocery credit. This is a credit for each exemption you claim on your return, provided the dependent is also an Idaho resident. The credit is $40 per exemption if your taxable income is more than $1,000 and $60 per exemption if your income is $1,000 or less. You can claim an additional $20 credit each for yourself and your spouse if you are 65 or older.
If you maintained a household for a member of your immediate family age 65 or older who has a developmental disability, you can claim a $100 tax credit if you didn’t claim the deduction of $1,000.
If you bought fuel such as diesel, propane or natural gas that you use for heating or in an off-highway vehicle, you can claim a refund for the Idaho special fuel tax you paid. You must attach Form 75 to claim this refund.
Sources:
Idaho Capital Gains Deduction – Form CG – Idaho Tax Commission
Idaho Fuels Use Report – Form 75 – Idaho Tax Commission
Idaho Individual Income Tax Instructions – Idaho Tax Commission
Idaho Individual Income Tax Return – Form 40 – Idaho Tax Commission
Idaho Part-Year Resident & Nonresident Income Tax Return – Form 43 – Idaho Tax Commission
Idaho Supplemental Schedule – Form 39R – Idaho Tax Commission
Idaho Supplemental Schedule – Form 39NR – Idaho Tax Commission
