Conformity to Federal Internal Revenue Code (IRC)
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, 2017. See House Bill 26 – signed by Governor Otter on Feb. 13, 2017.
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.
On Feb. 4, 2013, Gov. Otter signed House Bill 1, which makes Idaho law conform to the IRC. The bill provides that, for Idaho income tax purposes, the IRC means the Internal Revenue Code of 1986 as amended and in effect on the first day of January, 2013. Because Gov. Otter signed HB 1 after the passage of the American Taxpayer Relief Act of 2012 (the so-called "fiscal cliff" legislation), Idaho conforms to those provisions as well. The conformity bill also allows refund claims arising from the FAA Modernization and Reform Act that are filed on or before the statute of limitations date or April 15, 2013, whichever is later. However, Idaho still does not conform to the federal bonus depreciation. Bonus depreciation is a modification made in the Idaho Code by section 63-3022O.
Idaho law conforms to the IRC as of Jan. 1, 2012. Idaho doesn't conform to bonus depreciation for assets acquired after 2009. See House Bill 355 signed by the Governor on Feb. 6, 2012.
Idaho law conforms to the IRC as of Jan. 1, 2011. This includes provisions in federal acts passed after Feb. 17, 2009 and in 2010. Idaho didn't adopt, however, the changes to IRC section 168(k), which extended and increased amounts allowed for bonus depreciation for property acquired and placed in service after 2009. These changes were included in the "Small Business Jobs Act of 2010," and the "Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010." If you claim bonus depreciation on your federal return for assets placed in service after 2009, you must report an adjustment on the Idaho return. (Details provided below.)
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. See 2011 House Bill 102.
Bonus depreciation provisions in the federal acts not adopted by Idaho include:
- The extension of the additional first-year depreciation deduction for assets acquired and placed in service during 2010 (or placed in service during 2011 for certain long-lived property and transportation property).
- The extension and expansion of the additional first-year depreciation to 100% of the cost of qualified property placed in service after September 8, 2010 and before January 1, 2012 (before January 1, 2013 for certain longer-lived and transportation property), and the 50% first-year additional depreciation deduction for qualified property placed in service after December 31, 2011 and before January 1, 2013 (after December 31, 2012 and before January 1, 2014 for certain longer-lived and transportation property).
To report the difference between Idaho and federal law for bonus depreciation on 2010 returns:
- Complete a separate federal Form 4562 or your own schedule to compute Idaho depreciation as if you hadn't claimed the special depreciation allowance.
- Use the Idaho depreciation amounts to compute the Idaho adjusted basis and any gains or losses from the sale or exchange of the property.
- Enter the differences between the Idaho and federal depreciation amounts, and gains and losses from sales or exchanges of the property, on the other addition line.
The other addition line on the 2010 Idaho forms can be found as follows:
|Corporations||Form 41||line 17|
|S Corporations||Form 41S||line 22|
|Partnerships||Form 65||line 20|
|Fiduciaries||Form 66||Schedule B, line 5|
|Resident Individuals||Form 39R||Schedule A, line 5|
|Nonresident and Part-year residents||From 39NR||Schedule A, line 3|
Idaho law conforms to the IRC as of Feb. 17, 2009, including provisions passed during 2008 in the "Emergency Economic Stabilization Act of 2008," the "Housing and Economic Recovery Act of 2008," and the "Heroes Earning Assistance and Relief Tax Act." Idaho law also incorporates the provisions of the "American Recovery and Reinvestment Tax Act of 2009," signed into law by the President on Feb. 17, 2009. See House Bill 281 signed by the Governor on April 23, 2009.
Idaho law conforms to the IRC as of Feb. 14, 2008, including the provisions in the "Economic Stimulus Act of 2008." See House Bill 615 signed by the Governor on March 31, 2008.
Idaho law conforms to the IRC as of Jan. 1, 2008. See House Bill 342 signed by the Governor on Feb. 8, 2008.
Idaho law conforms to the IRC as of Jan. 1, 2007. See House Bill 16 signed by the Governor on Feb. 14, 2007.
New Federal Law — Additional Tax Exemptions for Housing Victims of Hurricane Katrina
The Katrina Emergency Tax Relief Act of 2005, signed by the President on Sept. 23, 2005, provides various tax benefits, including exemptions for housing Hurricane Katrina displaced individuals.
The Idaho Legislature has not adopted the provisions of the Katrina Emergency Tax Relief Act of 2005. Generally, Idaho adopts the provisions of the Internal Revenue Code as of Jan.1 each year. The 2006 Legislature will consider conformity with the Internal Revenue Code.
Idaho law conforms to the Internal Revenue Code (IRC) as of Jan. 1, 2005, with some exceptions noted below. Once Idaho conforms to the IRC, it follows the federal effective date of any federal changes adopted.
New Federal Law — General Sales Tax Deduction — The American Jobs Creation Act of 2004, signed by the President on Oct. 22, 2004, allows taxpayers to deduct state and local sales taxes instead of state and local income taxes as itemized deductions on the 2004 Federal Form 1040, Schedule A.
Idaho did not adopt this change to federal law. House Bill 10 requires sales tax claimed as an itemized deduction to be treated the same as income tax. The law requires the sales tax deducted to be added back to Idaho income. Taxpayers should add back the sales tax claimed as an itemized deduction on line 16 of Form 40 or line 37 of Form 43.
Changes to the IRC during 2003 included those made by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (Public Law 108-27) and the Military Tax Relief Act of 2003 (Public Law 108-121).
Changes adopted by Idaho as a result of the Jobs and Growth Tax Relief Reconciliation Act of 2003 include the following modifications to IRC Section 179:
- Increasing the amount that can be expensed to $100,000 for property placed in service in taxable years beginning in 2003, 2004, and 2005;
- Annual indexing for inflation of dollar limitations; and
- Allowing off-the-shelf-computer software as an asset qualified for the expensing.
Changes not adopted by Idaho in the Jobs and Growth Tax Relief Reconciliation Act of 2003 include:
- Increasing the additional first-year depreciation from 30% to 50% and extending it through Dec. 31, 2004. Idaho does not allow either the 30% or the 50% bonus depreciation.
The Military Tax Relief Act of 2003 provided various tax breaks for U.S. military personnel. These changes were adopted by Idaho and include:
- Expanding the ownership and use time period for an exclusion of gain from the sale of a principal residence by members of the uniformed services or the U.S. Foreign Service, effective for sales after May 6, 1997;
- Increasing the exclusion of death gratuity payments (which would double to $12,000) from gross income with respect to deceased members of the military, effective for deaths after Sept. 10, 2001;
- Allowing an above-the-line income tax deduction for the overnight travel expenses of National Guard and Reserve members, effective for tax years starting after Dec. 31, 2002; and
- Extending the Terrorism Tax Relief Act of 2001 to the families of astronauts who die while on a mission.