Welcome to the Summer 2023 issue of Tax Update — our business community newsletter. This edition features articles about new tax laws, taxable sales for recreation and admissions, and our new callback feature.
New tax laws – What you need to know
The 2023 Idaho Legislature passed tax laws providing property tax reduction, capping the cigar tax, increasing the dependent care tax deduction, and more. Below are some highlights. For more details about the legislation, visit the Legislature’s website.
Idaho conforms to the Internal Revenue Code for 2023
Idaho conforms to the Internal Revenue Code (IRC) as of January 1, 2023, with the following exception:
- IRC section 85, Unemployment Compensation, is applied as in effect on January 1, 2020.
House Bill 21 – Effective January 1, 2023
Changes to Idaho’s tax rate
Idaho’s tax rate is now 5.8% for all taxpayers. For individuals, the rate applies to taxable income over:
- $4,489 if you’re filing single
- $8,978 if you’re filing jointly
House Bill 172 – Effective January 1, 2023
Dependent care tax deduction increased
The maximum individual tax deduction for dependent care is now $12,000 per year. Dependents include a taxpayer’s children under the age of 13, a dependent of a taxpayer with physical or mental limitations, and the spouse of a taxpayer with physical or mental limitations.
House Bill 288 – Effective January 1, 2023
Grocery credit increased in 2023
The grocery tax credit for eligible Idaho residents increased from $100 to $120 starting in tax year 2023. The credit for Idahoans who are 65 and older increased from $120 to $140.
House Bill 509 – Effective March 25, 2022
Cigar tax cap
The tax rate for cigars is 40% of the wholesale price or 50 cents per cigar, whichever is lower. The tax rate for all other tobacco products will continue at 40% of the wholesale price.
House Bill 330 – Effective July 1, 2023
Property tax relief
All property tax taxpayers in Idaho will receive property tax relief in 2023 and beyond from state funds. More people also will qualify for Idaho’s Property Tax Reduction program, also known as the Circuit Breaker Program, because of relaxed legislative requirements.
The law’s first year could provide up to $355 million in property tax relief. In the second and third years, the law could provide about $110 million to reduce property taxes for homeowners, roughly $100 million to reduce property taxes for all property tax taxpayers, and about $100 million could be distributed to school districts based on average daily attendance.
The effects on individual property taxes will vary depending on the existence of certain school levies, taxing district budgets being set in the next few months, and changes in property values. Specific reductions will be determined this fall and shown on tax bills sent in late November.
House Bill 292 – Effective Various
Reminder to retailers about sales tax for recreation and admissions
If you charge your customers a fee to participate in recreational activities, you must collect sales tax on the fee. Some examples include but aren’t limited to sports leagues, youth sports camps, golfing fees and memberships, bowling, swimming pools, axe throwing, escape rooms, horseback riding, ziplining, and bouncy equipment.
An exemption from sales tax applies if all of the following are true:
- You’re a 501(c)(3) nonprofit that’s organizing the event.
- The event isn’t predominately recreational or commercial.
- Any entertainment included is minimal.
- You’ve paid sales tax on food and supplies used during the event.
Website gets an upgrade
The Tax Commission redesigned its website, tax.idaho.gov, in December to make it easier for taxpayers to use.
In addition to a new look, the site has a mobile-first design, so it works well with mobile devices as well as desktop computers. Other enhancements include a robust search feature and compliance with the Americans with Disabilities Act to improve the experience for those with disabilities.
New callback feature for call center
The Tax Commission has added a courtesy callback feature to its call center. The feature allows customers to keep their place in line when they call for tax help without having to wait on hold.
The callback feature gives customers the option of providing their phone number to receive a call from us. Wait times have continued to increase as more individuals and businesses move to Idaho.
Customers who choose the callback feature must be prepared to take the call because the system can’t call back multiple times. If customers don’t answer the callback, they must call again to get back in line.
The call center numbers for the Tax Commission are (208) 334-7660 in the Boise area or toll free at (800) 972-7660.
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