Idaho 2026 Tax Changes — What Residents & Business Owners Must Know
Beginning January 1, 2026, major federal tax changes take effect as temporary provisions expire and updated rules continue under new law.
Idaho residents will feel these changes at the federal level, and because Idaho uses federal AGI as the basis for state taxes, many households will experience higher state taxes as well.
- W-2 earners in Boise, Meridian, Nampa, Idaho Falls, Pocatello, Coeur d’Alene
- Farmers, ranchers, and agricultural families
- Skilled trades and construction workers (fast-growing sectors in Idaho)
- Families with children
- Business owners, LLCs, contractors, and S-Corp operators
- Real estate investors, landlords, and STR owners
- Retirees drawing IRA and 401(k) income
Key Federal Tax Changes Affecting Idaho Residents
Standard Deduction Shrinks in 2026
More Idaho taxpayers will see higher federal taxable income, especially:
- Homeowners in Boise suburbs
- Families with dependents
- Rural households with moderate incomes
- Middle-income couples
Idaho’s rising housing costs make this deduction reduction more noticeable.
Federal Tax Brackets Increase
Federal income brackets increase across all filing statuses:
- 12% becomes 15%
- 22% becomes 28%
- 24% becomes 31%
- Dual-income families in Treasure Valley
- Trades and industrial workers
- Healthcare and education professionals
- Remote workers who moved to Idaho with higher incomes
- Households earning between $60,000–$250,000
QBI (20% Business Deduction) Remains Federal, but Idaho Does Not Fully Mirror It
The federal QBI deduction remains, but Idaho does not provide an identical 20% deduction at the state level.
- Federal taxable income may decrease
- Idaho taxable income may not change accordingly
- Business owners must plan around both systems
- construction and trade workers
- small LLCs and S-Corps
- real estate agents
- independent contractors
- online businesses and remote entrepreneurs
Child Tax Credit Shrinks
- drop from ~$2,000 per child
- to about $1,000 per child
- with reduced refundability
Idaho’s family-heavy population — especially in Meridian, Nampa, and Idaho Falls — will see a noticeable shift in refunds.
Marriage Penalty Returns
- are pushed into higher federal brackets sooner
- lose access to certain credits faster
- have more federal taxable income
Couples earning between $75K–$200K will feel this most.
Idaho-Specific Tax Considerations
1. Idaho Uses Federal AGI as the Starting Point for State Taxes
Since Idaho starts state tax calculations from federal AGI, the changes to:
- federal deductions
- federal brackets
- federal credits
…will directly increase Idaho taxable income for many residents.
Even though Idaho recently lowered its top income tax rate, higher federal AGI means many households will owe more state tax overall.
2. Idaho Real Estate & Rental Income Will Be Affected
- Boise
- Meridian
- Nampa
- Twin Falls
- Coeur d’Alene
- Idaho Falls
- capital gains increases
- depreciation rule changes
- adjustments to rental loss treatment
- timing considerations for property sales
- changes affecting STR owners
Investors with rapidly appreciating property should plan ahead.
3. Short-Term Rental Owners Will Need Better Documentation
- Boise
- Coeur d'Alene
- McCall
- Sun Valley
- Sandpoint
2026 Changes:
- lower bonus depreciation
- stricter STR participation requirements
- rental income classification changes
- more stringent documentation
Owners who rely on STR losses against other income must prepare thoroughly.
4. Retirement Planning in Idaho Still Heavily Depends on Federal Rules
While Idaho provides some relief for retirement income depending on age and income type, federal changes still impact:
- IRA withdrawals
- 401(k) distributions
- Social Security taxation
- Roth conversion planning
- RMD implications
Higher federal brackets mean retirement income becomes more expensive.
Who Is Hit Hardest in Idaho (2026)
- Dual-income households
- Trades, construction, and industrial workers
- Homeowners with mortgages
- Business owners and self-employed individuals
- Farmers, ranchers, and rural operators
- Real estate investors and landlords
- STR owners
- Retirees with IRA or pension income
- Families with children
What Idaho Residents Should Do Before December 31, 2025
- Review withholding for 2026
- Maximize retirement contributions while rates are lower
- Evaluate Roth conversion timing
- Review business structure (LLC vs S-Corp)
- Document STR and rental activity thoroughly
- Plan capital gains or property sales strategically
- Understand how QBI affects federal vs Idaho taxation
- Complete a personalized 2025–2026 tax plan
Idaho 2026 Tax FAQ
Does Idaho conform to QBI?
Not fully. QBI remains federal-only.
Will Idaho taxes go up?
State tax rates do not change, but taxable income may rise due to federal adjustments.
Are families affected?
Yes — credits shrink and federal taxable income increases.
Are retirees impacted?
Yes — federal brackets and IRA withdrawal taxation increase their total tax burden.
Are STR owners affected?
Yes — depreciation and rental participation rules change.
Get a 2026 Idaho Tax Strategy
Idaho residents face meaningful changes in 2026 due to reductions in deductions, higher federal brackets, adjustments to credit eligibility, and shifts affecting business owners, investors, and retirees.
A personalized tax plan ensures you’re ready before these changes take full effect.