Idaho Subtractions from Income
MILITARY PAY EARNED OUTSIDE OF IDAHO
If you are serving in the United States Army, Navy, Marine Corps, Air Force, or Coast Guard on active military duty that is continuous and uninterrupted for 120 days, your active duty military wages for service outside of Idaho aren't subject to Idaho tax. The continuous 120 days do not have to be in the same tax year. Enter your nontaxable military wages.
Do not include military wages earned while stationed in Idaho. Your wage and tax statement (W-2) doesn't show this amount separately and you may have to compute the amount of income earned outside of Idaho. You should see your unit of assignment or use your orders in making the computation.
National Guard or Reserve pay, including annual training pay, generally doesn't qualify as active duty pay unless you have been called into full-time duty for 120 days or more. If you are a commissioned officer of the Public Health Service or of the National Oceanic and Atmospheric Administration militarized by the President of the United States and attached to the armed forces, your active duty military wages earned outside Idaho qualify for this deduction.
CHILD AND DEPENDENT CARE
If you were able to claim the federal Credit for Child and Dependent Care Expenses, you are allowed an Idaho deduction for the child care expenses you paid for the care of your dependents. The Idaho deduction is a different amount than the federal credit. Enter the amount of dependent care expenses paid and TaxSlayer will calculate the amount allowed by Idaho. TaxSlayer will also include federal Form 2441, Child and Dependent Care Expenses, with your return.
RETIREMENT BENEFITS DEDUCTION:
RAILROAD AND SOCIAL SECURITY BENEFITS - Idaho doesn't tax Social Security benefits, benefits paid by the Railroad Retirement Board or Canadian Social Security benefits (OAS or CPP) that are taxable on your federal return. Exempt payments from the Railroad Retirement Board include:
- Retirement, supplemental, and disability annuities.
- Unemployment and sickness benefits.
Enter the taxable amount of Social Security benefits shown on your federal Form 1040, line 20b, or Form 1040A, line 14b. Enter the taxable amount of railroad benefits shown on your federal Form 1040, line 16b, or Form 1040A, line 16a, or Form 1040A, line12a. Disability pension paid by the Federal Railroad Retirement Act may be included on Form 1040, line 7, as wages, if you are under the minimum retirement age.
RETIREMENT BENEFITS DEDUCTION FOR QUALIFIED RETIREMENT BENEFITS INCLUDED IN FEDERAL INCOME
If you are age 65 or older, or if you are disabled and age 62 or older, you may be able to deduct some of the retirement benefits and annuities you receive. You can not claim this deduction if you file married filing separate.
Only the following are qualified retirement benefits:
- Civil Service Employees: Retirement annuities paid by the Civil Service Retirement System (CSRS) to a retired civil service employee or the unremarried widow of the employee if the recipient is age 65 or older, or disabled and age 62 or older. To qualify for the deduction the employee must have established eligibility before 1984. Retirement annuities paid by the Federal Employees Retirement System do not qualify.
- Idaho Firemen: Retirement benefits paid by the Public Employee Retirement System of Idaho (PERSI) relating to the Firemen's Retirement Fund to a retired fireman or the unremarried widow of a retired fireman if the recipient is age 65 or older, or disabled and age 62 or older. Benefits paid out of the PERSI Base Plan do not qualify for the deduction.
- Policemen of an Idaho city: Retirement benefits paid from the policemen’s retirement fund of a city within Idaho to a retired policeman or the unremarried widow of a retired policeman if the recipient is age 65 or older, or disabled and age 62 or older.
- Servicemen: Retirement benefits paid by the United States to a retired member of the U.S. military or the unremarried widow of such member if the recipient is age 65 or older, or disabled and age 62 or older.
- The amount deducted must be reduced by retirement benefits paid under the Federal Social Security Act and the Federal Railroad Retirement Act received by you and your spouse. Disability pension paid by the Federal Railroad Retirement Act may not be included in Box 5 of your Form RRB-1099, if you are under the minimum retirement age. Instead it may be included on line 7 of Form 1040 as wages.
The maximum amounts that may be deducted for 2014 are:
Married filing jointly:
age 65 or older ........................................................... $47,556
age 62 or older and disabled ......................................... $47,556
age 65 or older ........................................................... $31,704
age 62 or older and disabled ..........................................$31,704
HEALTH INSURANCE PREMIUMS
Deduct premiums you paid for health insurance for yourself, your spouse, and your dependents if those premiums haven't already been deducted or excluded from your income on your Federal Form 1040.
IDAHO COLLEGE SAVINGS PROGRAM
You may contribute up to $4,000 ($8,000 if married filing a joint return) per year to a qualified Idaho college savings program and deduct the contribution. The account must be established with Upromise Investments, Inc. The account owner and beneficiary will be designated at the time the account is established. The account owner will have the right to make withdrawals for payment of higher education expenses for the beneficiary. The person that withdraws the funds must report the withdrawal amounts as income in accordance with Internal Revenue Code Section 529. Additional information can be obtained at idsaves.org or by calling (866) 433-2533.
INTEREST ON U.S. GOVERNMENT OBLIGATIONS
Interest income you received from obligations of the U.S. Government isn't subject to the Idaho tax. Deduct any U.S. Government interest included in federal adjusted gross income, Form 40, line 7. Examples of obligations of the U.S. Government include:
- Banks for Cooperatives
- Federal Farm Credit Banks
- Federal Financing Bank
- Federal Homeowners Loan Bank
- Federal Intermediate Credit Bank
- Federal Land Bank
- Puerto Rico
- Student Loan Marketing Association
- Virgin Islands
Note: Interest income received from the Federal National Mortgage Association and the Government National Mortgage Association is not paid by the U.S. Government and is subject to Idaho income tax. If you have interest income from a mutual fund that invests in both nonexempt securities and exempt U.S. government securities, you may deduct the portion of the interest that is attributable to direct U.S. government obligations. This amount must be identified by the mutual fund to be deductible.
ENERGY EFFICIENCY UPGRADE
To qualify for this deduction, your Idaho residence must have existed, been under construction, or had a building permit issued on or before January 1, 2002. Energy efficiency upgrade means an energy efficiency improvement to your residence's envelope or duct system that meets or exceeds the minimum value for
the improved component established by the version of the International Energy Conservation Code (IECC) in effect in Idaho during the tax year in which the improvement is made.
Energy efficiency upgrades include:
- Insulation that is added to, not replacing, existing insulation. Insulated siding doesn't qualify unless the cost of the siding and the insulating material is separately stated, in which case the cost of the insulating material alone qualifies.
- Windows that replace less efficient existing windows.
- Storm windows.
- Weather stripping and caulking.
- Duct sealing and insulation. Duct sealing requires mechanical fastening of joints and mastic sealant. The amount charged for labor to install the energy efficiency upgrades is also deductible.
Storm doors no longer qualify for this deduction.
TECHNOLOGICAL EQUIPMENT DONATION
Enter the fair market value of technological equipment donated to a public or nonprofit private elementary or secondary school, public or nonprofit private college or university, public library, or library district located in Idaho. Items that qualify for this deduction are limited to computers, computer software, and scientific equipment or apparatus manufactured within five years of the date of donation. The amount deducted can not reduce Idaho taxable income to less than zero. Any unused deduction can not be carried to another year.
If you adopt a child, you may deduct the expenses incurred in the adoption. You may claim legal and medical expenses incurred up to a maximum of $3,000 per adoption. Travel expenses do not qualify. If the expenses are incurred in two or more years, deduct the costs in the year paid until the $3,000 limit has been met. The expenses related to an unsuccessful attempt to adopt are not deductible. If expenses were claimed in a year prior to such a determination, file an amended return to add back any deduction claimed for the unsuccessful attempt.
IDAHO MEDICAL SAVINGS ACCOUNT CONTRIBUTIONS AND INTEREST
You may contribute up to $10,000 ($20,000 if married filing a joint return) to an Idaho medical savings account and deduct the contribution. Deductible contributions don't include reimbursements that were redeposited into your Idaho medical savings account. Don't include amounts deducted on federal
An Idaho medical savings account is generally established with a bank, savings and loan, or credit union. The account is established to pay eligible medical expenses of the account holder and the account holder's dependents. Interest earned on the account is included on line 13, but only if included on Form 40, line 7. Add your qualifying contributions to the interest earned on the account. Enter the name of the financial institution and your account number in the spaces
MAINTAINING A HOME FOR AGED AND/OR DEVELOPMENTALLY DISABLED
You may deduct $1,000 for each family member, not including yourself or your spouse, who is age 65 or older and for whom you maintain a household and provide more than one-half of his support for the year. You may deduct $1,000 for each family member, including yourself and your spouse, who is developmentally disabled and for whom you maintain a household and provide more than one half of his support for the year. No more than three deductions of $1,000 are allowed. If you claim this deduction, you can not claim the $100 credit in Part F.
Developmental disability means a chronic disability that:
1. Is attributable to an impairment such as:
- Intellectual disability
- Cerebral palsy
- Other condition found to be closely related to, or similar to, one of these impairments; and
2. Results in substantial functional limitation in three or more of the following areas of life activity:
- Receptive and expressive language
- Capacity for independent living
- Economic self-sufficiency; and
3. Reflects the need for a combination and sequence of special, interdisciplinary or generic care, treatment or other services which are of lifelong or extended duration and individually planned and coordinated.
If the home was maintained for the family member for less than a full year, the deduction is allowed at the rate of $83.33 for each month the home was maintained.
A family member is any person who meets the relationship test to be claimed as a dependent on income tax returns. Refer to the federal Form 1040 instructions for more information.
Maintaining a household means paying more than one-half the expenses incurred for the benefit of all the household’s occupants. Social Security benefits aren't support provided by you but must be included in the computation of total support provided. Some examples of expenses of maintaining a household include: property taxes, mortgage interest, rent, utility charges, upkeep and repairs, property insurance and food consumed on the premises.
You may deduct Idaho lottery prizes of less than $600 per prize included in federal adjusted gross income on Form 40, line 7. You can not deduct lottery prizes from other states.
WORKERS COMPENSATION INSURANCE
A self-employed individual may deduct the actual cost of amounts paid for worker's compensation insurance coverage in Idaho, if the cost is not deducted elsewhere.
INCOME EARNED ON RESERVATIONS BY NATIVE AMERICANS
American Indians who are enrolled members of a federally recognized tribe, who live and work on a reservation can deduct all reservation sourced income received while living and working on the reservation if the income is included on Form 40, line 7. Income earned off the reservation can not be deducted. Income earned on the reservation can not be deducted if you live off the reservation.
ALTERNATIVE ENERGY DEVICES
If you install an alternative energy device in your Idaho residence, you may deduct a portion of the amount actually paid or accrued (billed but not paid). In the year the device is placed in service, you can deduct 40% of the cost to construct, reconstruct, remodel, install or acquire the device, but no more than $5,000. In the next three years after installation, you can deduct 20% of these costs per year, but not more than $5,000 in any year.
Qualifying devices include:
- A system using solar radiation, wind or geothermal resource primarily to provide heating or cooling, or produce electrical power, or any combination thereof
- A fluid-to-air heat pump operating on a fluid reservoir heated by solar radiation or geothermal resource but not an air-to-air heat pump unless it uses geothermal resources as part of the system
- A natural gas or propane heating unit that replaces a noncertified wood stove
- An Environmental Protection Agency (EPA) certified wood stove or pellet stove meeting the most current industry and state standards that replaces a noncertified wood stove.
Identify any other subtraction to which you are entitled and claim the amount on this line. Don't include income earned in another state as a subtraction.
Don't include foreign taxes as a subtraction, since they're claimed as part of the Idaho itemized deduction, if allowable.
IDAHO CAPITAL GAINS DEDUCTION
If you had capital gain net income from the sale of qualified Idaho property described below, you may be able to deduct 60% of the capital gain net income reported on federal Schedule D.
(a) Real property held for at least 12 months, or
(b) Tangible personal property used in a revenue-producing enterprise and held for at least 12 months. A revenue producing enterprise means:
- Producing, assembling, fabricating, manufacturing or processing any agricultural, mineral or manufactured product;
- Storing, warehousing, distributing or selling at wholesale any products of agriculture, mining or manufacturing;
- Feeding livestock at a feedlot;
- Operating laboratories or other facilities for scientific, agricultural, animal husbandry or industrial research, development or testing.
(c) Cattle and horses held for at least 24 months, and other livestock used for breeding held for at least 12 months,
- For Individuals – if more than one-half of the taxpayer's gross income is from farming or ranching in Idaho,
- For Members of a Pass-through Entity – if more than one-half of the entity's gross income is from farming or ranching in Idaho, or
(d) Timber held for at least 24 months.
NOTE: Gains from the sale of stocks and other intangibles
BONUS DEPRECIATION FOR PROPERTY ACQUIRED BEFORE 2008 OR AFTER 2009
If you claimed the bonus depreciation for federal purposes:
- Complete a separate federal Form 4562 or detailed computation for Idaho depreciation purposes as if the special depreciation allowance hadn't been claimed.
- Compute the Idaho adjusted basis and any gains or losses from the sale or exchange of the property using the Idaho depreciation amounts.
- Enter the differences between the Idaho and federal depreciation amounts and gains and losses from sales or exchanges of the property on the bonus depreciation line on Form 39R or 39NR.
FOR PROPERTY ACQUIRED AFTER 2007 AND BEFORE 2010
Idaho conforms to the federal bonus depreciation provisions. The amounts you use for federal purposes will also be used for Idaho. No additional forms or computations are needed for Idaho.
For additional information, please see the Idaho state instructions.