Idaho is reportedly a popular retirement destination, having popped up on several Best Places to Retire lists, but that’s probably not because of its taxes.
“Idaho is not a particularly good place to retire, from a tax standpoint, and not bad,” Kevin Cahill, senior economist, partner, and project director for ECONorthwest, a Portland economics consultancy. Cahill works in Boise.
Cahill said it’s difficult to calculate the tax benefits of moving to Boise as a retiree, and it depends on individual factors.
“For any given individual, it’s a very tough question,” said “You really want to look at the overall tax burden a retiree would have.”
For example, a retiree who is working part-time will have different tax considerations from a retiree out of the labor force and only collecting Social Security. “It’s solidly middle of the road. Overall, I would be very surprised if anyone would make an argument that it’s for tax reasons,” he said.
“I’m a retiree who came to Idaho, but I didn’t come here for its tax structure – I came here for family,” said Gail Lusk, Tax-Aide District Coordinator for Boise and surrounding areas for AARP, a nonprofit, nonpartisan organization for Americans over 50.
The issue is that there are several kinds of taxes, and in some ways, Idaho is favorable for retirees and in other ways it is not. So retirees who move to Idaho typically have reasons other than taxes for moving to the state. Here is the breakdown on Idaho taxes for retirees.
- Individual income tax: While Idaho doesn’t have any breaks on individual income tax based on age, Social Security benefits are exempt from Idaho income tax, said Renee Eymann, public information officer for the Idaho State Tax Commission. In addition, for residents 65 and older, some federal, state, and local pensions (civil service employees, Idaho firefighters, police officers of an Idaho city, and service members) are also exempt. However, some neighboring states, such as Washington and Nevada, don’t have any income tax at all. In addition, Idaho’s income tax starts at a relatively low level, $10,000, Cahill said. On the other hand, the rate is relatively low, 4 percent to 7 percent, Lusk said.
- Sales tax: Idaho has a sales tax, compared with some neighboring states, such as Oregon, that don’t. The state sales tax rate is 6 percent, but prescription drugs and durable medical equipment aren’t taxed, Eymann said. Idaho also has a grocery tax, but Idahoans can get a $100 credit for the sales tax they pay on groceries, she said. The credit is $120 for people age 65 and older.
- Local option sales tax: In some communities considered to be “resorts,” including such popular retirement destinations as Sun Valley and Sandpoint, residents and visitors can be subject to additional sales taxes. “Local option sales taxes are administered by local jurisdictions, and their rates vary,” said Eymann. “Resort cities have a choice in what’s taxed and can include everything that’s subject to the state sales tax. Some, but not all, choose to limit the local sales tax to lodging, alcohol by the drink, and restaurant food.”
- Property tax: Idaho has three types of property tax relief for which retirees may qualify, Eymann said. First, homeowners who are 65 and older and low income may qualify for property tax reduction from $150 to $1,320. In addition, starting in 2019, any veteran with a 100 percent service-connected disability gets the full property tax reduction of $1,320, regardless of age, she said. Second, homeowners who are 65 and older and low income may also qualify for a property tax deferral. Finally, retirees are eligible for the standard Idaho homeowner’s exemption, she said.
- Estate/Inheritance tax: Idaho doesn’t have estate or inheritance tax.
People with only Social Security income, or income under $10,000, don’t need to file, but Lusk recommends that people file anyway.
“It’s always better to file because it protects your identity,” she said. “It puts your driver’s license information in your tax return. If they get one from someone else, they can follow up on that and protect your identity.”