Once Idaho conforms to the IRC, it follows the federal effective date of any federal changes adopted, including any retroactive dates.
Idaho law conforms to the Internal Revenue Code (IRC) as of Jan. 1, 2018. See House Bill 463 signed by Governor Otter on March 12, 2018.
For individuals, the changes include:
- Increasing the standard deductions
- Single = $12,000
- Head of Household = $18,000
- Married Filing Jointly = $24,000
- Eliminating the personal exemptions
- Eliminating dependent exemptions
- Eliminating or capping most itemized deductions
- Changing the definitions for qualified expenses from a 529 Education Savings account to include K-12 and private schools
- Creating a nonrefundable Idaho child tax credit of $130 per qualifying child. House Bill 675 subsequently increased the credit to $205.
- Reducing the individual income tax rate 0.475%. The top rate for individuals is now 6.925%.
For businesses, the changes include:
- Increase of IRC Section 179 expense limit to $1 million.
- The section 179 is an immediate expensing or accelerated depreciation election. The new law raises the expense limit from $500K to $1 million.
- Bonus depreciation (section 168(k)) is a separate issue and Idaho doesn’t conform to that section.
- Simplified accounting for small business.
- Simplified accounting increases the threshold for a business to be required to use accrual basis accounting from $5 million in gross receipts to $25 million. For example, a business will be able to take a deduction for some additional items that it previously would have kept as assets until used.
- Interest expense limited to 30%.
- Interest expense deductions for a business are being limited to 30% of the sum of adjusted taxable income and taxable interest income.
- 1031 exchanges limited to real estate.
- The section 1031 exchange allows deferring reporting any gain on the exchange of property except for cash received, until ultimately sold. This provision limits exchanges of like-kind property to real property.
- No longer allows like-kind exchanges for other investment property such as airplanes or art.
- S corporation to C corporation conversion rules.
- The S corporation to C corporation conversion will allow some post-conversion distributions.
- Inclusion of income (more choices).
- The inclusion of income provision requires businesses to report taxable income no later than when it’s reported on their financial statement.
- Repeal Section 199, the domestic production deduction.
- The deduction’s original intent was to encourage investment in domestic facilities. With the new federal territorial tax regime established with the Tax Cuts and Jobs Act, this provision isn’t necessary.
- Repeal employee entertainment expense.
- Employee recreational memberships aren’t allowed. Professional memberships for business are allowed.
- Repeal employee transportation and parking reimbursement.
- Employee commuting and parking expenses are no longer allowed.
- Section 199A – Reduce most pass-through income by 20% on the owner’s income tax return.
- Section 461(l)(2) – Disallow active pass-through losses in excess of $500,000 for joint filers, $250,000 for all others.
- Reduction of the corporate income tax rate by 0.475%. The top rate for corporations is now 6.925%.
Idaho has passed two laws to conform to parts of the Internal Revenue Code (IRC) as of Dec. 21, 2017. The laws affect only tax year 2017.
House Bill 355
(signed by Governor Otter on Feb. 9, 2018)
In addition to the normal conformity, Idaho also conforms to:
- The provision that lowers the threshold to claim medical expenses from 10% down to 7.5%.
- The provision that requires taxpayers to report and pay tax on the repatriation of previously unreported overseas earnings that could apply to 2017. Taxpayers who file on a water’s-edge basis should attach their IRC 965 Transition Tax Statement to their Idaho return.
Idaho still doesn’t conform to bonus depreciation.
House Bill 624
(signed by Governor Otter on March 20, 2018)
Idaho conforms to some of the federal tax breaks that Congress extended as part of the federal budget reconciliation. The Idaho law extends the sunset date of 11 deductions that Idaho normally conforms to.
Below is a list of Internal Revenue Codes that Idaho conforms to for 2017 and their description.
|108||Exclusion from gross income of principal residence debt relief|
|163||Mortgage insurance premium deduction|
|222||Qualified tuition deduction (On Form 40, it's included in your federal adjusted gross income. On Form 43, report on line 22.)|
|168(e)||3-year depreciation of certain race horses|
|168(i)||7-year recovery for motorsports complexes|
|179E||Mine safety expense deduction|
|199||Puerto Rico production deductions 199|
|168(e)||5-year cost recovery for energy property|
|179D||Energy efficient commercial building expenses|
|181||Film, television, and theater production cost deductions|
|451||State energy restructuring|
Idaho law conforms to the Internal Revenue Code (IRC) as of Jan. 1, 2016. See House Bill 425 signed by Governor Otter on February 9, 2016.
- Idaho conforms to the IRC section 179 expense provisions. You can claim the IRC section 179 expense on your Idaho return to the extent you claim this deduction on your federal income tax return.
- Idaho doesn’t conform to bonus depreciation.
Since Congress extended the federal provisions for a general sales tax deduction, as well as tuition and related expenses, you can report these expenses as follows:
- Report a deduction for state and local sales tax on: Form 40, line 14, or Form 43, line 34.
- Report qualified tuition and related expenses on: Form 40 — these items will be part of your federal adjusted gross income (AGI), or Form 43, line 22
Idaho conforms to the new federal repair regulations but doesn’t require documentation of that change other than what’s required at the federal level.
Idaho law conforms to the Internal Revenue Code (IRC) as of Jan. 1, 2015. See House Bill 77 signed by Gov. Otter on Feb. 23, 2015.
Idaho conforms to the IRC section 179 expense provisions. You can claim the IRC section 179 expense on your Idaho return to the extent you claim this deduction on your federal income tax return.
Idaho doesn’t conform to bonus depreciation.
Since Congress extended the federal provisions for a general sales tax deduction, as well as tuition and related expenses, you can report these items as follows:
- Report a deduction for state and local sales tax on:
- Form 40, line 14, or
- Form 43, line 34
- Report qualified tuition and related expenses on:
- Form 40 – these items will be part of your federal adjusted gross income (AGI), or
- Form 43, line 22
Idaho conforms to the new federal repair regulations but doesn’t require documentation of that change, other than what’s required at the federal level.