Idaho Subtractions

Idaho Net Operating Loss (NOL) Carryover and Carryback

Enter the Idaho NOL carryover. Include Form 56 or a schedule showing the application of the loss. If this is an amended return to claim an NOL carryback, enter the amount of the NOL carryback. Include Form 56 or a schedule showing the application of the loss. Enter the total of the NOL carryover and carryback amounts

State Income Tax Refund If you itemized your deductions on federal Form 1040, enter the amount of all state income tax refunds and state tax rebates included in income on federal Schedule 1, line 1.

 

Interest from U.S. Government Obligations

 

Idaho doesn’t tax interest income you received from U.S. government obligations. Deduct any U.S. government interest included in federal adjusted gross income, Form 40, line 7. Examples of U.S. government obligations include:

 

• Banks for Cooperatives

 

• Federal Farm Credit Banks

 

• Federal Financing Bank

 

• Federal Homeowners Loan Bank

 

• Federal Intermediate Credit Bank

 

• Federal Land Bank

 

• Guam

 

• Puerto Rico

 

• Student Loan Marketing Association

 

• Tennessee Valley Authority Bonds

 

• Territory of Alaska

 

• Territory of Hawaii

 

• Territory of Samoa

 

• U.S. Series EE and HH Bonds

 

• U.S. Treasury Bills and Notes

 

• Virgin Islands

 

Idaho taxes interest income received from the Federal National Mortgage Association (FNMA) and the Government National Mortgage Association (GNMA).

 

If you have interest income from a mutual fund that invests in both nonexempt securities and exempt U.S. government securities, you can deduct the portion of the interest that’s attributable to direct U.S. government obligations. This amount must be identified by the mutual fund to be deductible.  This includes your distributive share from Form ID K-1, Part IV, line 25.

 

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, and must be your primary residence.

 

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 when the improvement is made. Contact the Idaho Division of Building Safety at dbs.idaho.gov for more information.

Examples of energy efficiency upgrades include:

• Insulation that’s added to existing insulation. Insulated siding doesn’t qualify unless the cost of the siding and the insulating material is stated separately. The cost of the insulating material is the only thing that 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 also is deductible.

Alternative Energy Device Deduction

If you install an alternative energy device in your Idaho residence, you can 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 not 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

A noncertified wood stove is a wood stove that doesn’t meet the most current EPA standards. You must take the noncertified wood stove to a site authorized by the Idaho Division of Environmental Quality (DEQ) within 30 days from the date of purchase of the qualifying device. The DEQ will give you a receipt to verify it received and destroyed the noncertified wood stove.

You must install the natural gas or propane heating unit or the EPA-certified wood stove or pellet stove in the same tax year that you surrender the nonqualifying wood stove to the DEQ.

Child and Dependent Care

If you claimed the federal Credit for Child and Dependent Care Expenses, you’re 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.

Complete the worksheet to determine your Idaho child or dependent care deduction. Refer to federal Form 2441 to determine amounts to enter on lines 1 through 6.

Social Security and Railroad Benefits

Idaho doesn’t tax Social Security benefits, benefits paid by the Railroad Retirement Board, or Canadian Social Security benefits (OAS, QPP 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 from Form SSA-1099 or Social Security equivalent railroad benefits from Form RRB-1099 included on your federal Form 1040 or 1040-SR, line 6b.

Don’t enter the amount reported on Form 1040 or 1040-SR, line 6a.  Enter the taxable amount of non-Social Security equivalent railroad benefits from Form RRB-1099R included on your federal Form 1040 or 1040-SR, line 5b. Don’t enter the amount reported on Form 1040 or 1040-SR, line 5a.

If subtracting benefits from the Railroad Retirement Board, you must include Form RRB-1099 or RRB-1099-R with your return. 

Disability pension paid by the Federal Railroad Retirement Act may be included as wages on Form 1040 or 1040-SR, line 1 if you’re under the minimum retirement age.

Retirement Benefits Deduction for Qualified Retirement Benefits

You may be able to deduct some of the qualifying retirement benefits and annuities you receive.

The Idaho Retirement Benefits Deduction has a two-part qualification. You must qualify for both parts to receive this deduction.

Part One – Age, Disability, and Marital/Filing Status

The recipients must be at least age 65 or be classified as disabled and be at least age 62.

The following individuals are classified as disabled:

• An individual recognized as disabled by the Social Security Administration, the Railroad Retirement Board, or the Office of Management and Budget

• A veteran of a U.S. war with a service-connected disability rating of 10% or more

• A veteran of a U.S. war with a nonservice-connected disability pension

• A person who has a physician-certified permanent disability with no expectation of improvement

If you’re married, you can’t claim this deduction if you file separately. If you’re an unremarried widow or widower of a pensioner and receive qualifying survivor benefits, you may be eligible to claim the retirement benefit deduction if you meet the age/disability requirements.

Part Two – Qualified Retirement Benefits

The recipients must meet the requirements in Part One, and their qualified retirement benefits must be one of the following:

• Civil Service Employees: Retirement annuities paid by the United States of America Civil Service Retirement System (CSRS), the Foreign Service Retirement and Disability System (FSRDS), or the offset programs of these two systems. To qualify for the deduction, the employee must have established eligibility before 1984. Retirement annuities paid to a retired federal employee under the Federal Employees Retirement System (FERS) don’t qualify for the deduction. If you received a CSA-1099, you can tell if your benefits are paid under the CSRS or FERS by looking at the first digit of the account number shown on your CSA-1099. If the first digit is 7, the benefits are paid out of FERS and don’t qualify. If the first digit is 8, look at your Notice of Annuity Adjustment from the Office of Personnel

Management. The notice shows how much of your benefits are paid from CSRS and how much are paid from FERS. Only the portion paid from CSRS qualifies for this deduction. If the first digit is 0, 1, 2, 3, or 4, the benefits are paid out of CSRS.

• Idaho Firefighters: Retirement benefits paid by the Public Employee Retirement System of Idaho (PERSI) relating to the Firemen’s Retirement Fund. If you received a 1099R and your account number includes the FRF (Firemen’s Retirement Fund) designation, your benefits may qualify for the deduction. Benefits paid out of the PERSI Base Plan don’t qualify for the deduction.

• Police Officers of an Idaho City: Retirement benefits paid from the Policemen’s Retirement Fund that no longer admits new members and, on January 1, 2012, was administered by an Idaho city or PERSI. Also, benefits paid by PERSI relating to Idaho police officer employment not included in the federal Social Security retirement system. For example, benefits paid out of the city police retirement funds for the cities of Coeur d’Alene, Lewiston, and Pocatello may qualify for the deduction.

Similarly, benefits paid by PERSI relating to the old Idaho Falls Policemen’s Retirement Fund may qualify for the deduction. If you received a 1099R and your account number includes the IFP (Idaho Falls Police) designation, your benefits may qualify for the deduction. Benefits paid out of the PERSI Base Plan don’t qualify for the deduction.

• Service Members: Retirement benefits paid by the United States to a retired member of the

U.S. military.  Disability pension paid by the Federal Railroad Retirement Act may not be included on your Form RRB-1099 or RRB-1099-R, if you’re under the minimum retirement age. Instead it may be included on Form 1040 or 1040-SR, line 1 as wages.

Technological Equipment Donation

Enter the lesser of cost or fair market value of technological equipment donated to one or more of the following Idaho educational institutions or libraries located in Idaho:

• Public or nonprofit private elementary or secondary school

• Public or nonprofit private college or university

• Public library or library district 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’t reduce Idaho taxable income to less than zero.

Any unused deduction can’t be carried to another year.

Include your distributive share from the appropriate column of Form ID K-1, Part IV, line 26. The deduction from a pass-through entity can’t be more than the amount of pass-through income minus deductions of the entity making the contribution.

Idaho Capital Gains Deduction

You may be able to deduct 60% of the capital gain net income reported on federal Schedule D from the sale of qualified Idaho property described below.

(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, or 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

(d) Timber held for at least 24 months

Note: Gains from the sale of stocks and other intangibles don’t qualify.

Complete Idaho Form CG to compute your capital gains deduction.

Active Duty Military Pay Earned Outside of Idaho

If you’re serving in the United States military on active duty that’s continuous and uninterrupted for 120 days, Idaho doesn’t tax your active duty military wages for service outside of Idaho. The continuous 120 days don’t have to be in the same tax year.

Enter your nontaxable military wages.  Don’t include military wages earned while stationed in Idaho. Your 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. Include a copy of your worksheet.

National Guard or Reserve pay, including annual training pay, generally doesn’t qualify as active duty pay unless you’ve been called into full-time duty for 120 days or more. If you’re 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. Enter these wages on this line.

Adoption Expenses

If you adopt a child, you can deduct some of the expenses incurred in the adoption. You can claim legal and medical expenses incurred up to a maximum of $10,000 per adoption. Travel expenses don’t qualify. If you incur expenses in two or more years, deduct the costs in the year paid until you meet the $10,000 limit. The expenses related to an unsuccessful attempt to adopt aren’t deductible.

If you claim expenses in a year before 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 can 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 Form 1040 or 1040-SR.

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.

Include interest earned on the account 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 provided.

Idaho College Savings Program

You can deduct up to $6,000 ($12,000 if married filing a joint return) per year in contributions to accounts in the Idaho College Savings Program (IDeal). Contributions to an out-of-state qualified tuition program aren’t eligible for the deduction. Designate the account owner and beneficiary at the time you establish the account. The account owner can make withdrawals for a qualified eligible education expense for the beneficiary as provided in 26 U.S.C. section 529. The person who withdraws the funds must report the amounts withdrawn as income. More information is available at idsaves.org or by calling (866) 433-2533.

Home for the Aged

You can deduct $1,000 for each family member, not including yourself or your spouse, who:

• Is age 65 or older

• You maintain a household for, and

• You provide more than one-half of the family member’s support for the year

Developmentally Disabled

You can deduct $1,000 for each family member, including yourself and your spouse, who:

• Is developmentally disabled

• You maintain a household for, and

• You provide more than one-half of the family member’s support for the year

No more than three deductions of $1,000 are allowed. If you claim this deduction, you can’t claim the$100 credit in Part E.

Developmental disability means a chronic disability that:

• Is attributable to an impairment such as:

-Intellectual disability

-Cerebral palsy

-Epilepsy

-Autism

-Other condition found to be closely related to or similar to, one of these impairments, and • Results insubstantial functional limitation in three or more of the following areas of life activity:

-Self-care

-Receptive and expressive language

-Learning

-Mobility

-Self-direction

-Capacity for independent living

-Economic self-sufficiency, and

• 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 you maintain the home 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 of 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

Idaho Lottery Winnings

You can deduct Idaho lottery prizes of less than $600 per prize included in federal adjusted gross income on Form 40, line 7. You can’t deduct lottery prizes from other states.

Income Earned on a Reservation by an American Indian

You can deduct all your income from working on the reservation only when all these criteria are met:

• You’re enrolled in a federally recognized tribe

• You live and work on the reservation

• The income is included on Form 40, line 7 of your tax return

If you have no other income, you aren’t required to file.

Income earned off the reservation can’t be deducted. Income earned on the reservation can’t be deducted if you live off the reservation.

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.

If you claimed a deduction for health insurance premiums on your federal Form 1040 or 1040-SR, Schedule A, use the worksheet on page 35 to calculate the deduction allowed for health insurance premiums. The worksheet follows the priority that itemized deductions first apply to health insurance premiums then to long-term care insurance.

Long-term Care Insurance
You can deduct the amount you paid in premiums for qualified long-term care insurance that isn’t otherwise deducted or accounted for. If you claimed
a deduction for long-term care insurance on your federal Form 1040 or 1040-SR, Schedule A, use the following worksheet to calculate the long-term care
insurance allowed as a deduction.
Qualified long-term care insurance includes any insurance policy that provides coverage for at least 12 consecutive months for yourself, your spouse, or your dependents for one or more necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in
a setting other than an acute care unit of a hospital.
Group and individual annuities and life insurance policies that directly provide or supplement long-term are insurance qualify. This includes a policy that provides for payment of benefits based on cognitive
impairment or loss of functional capacity.
Qualified long-term care insurance doesn’t include any insurance policy that’s offered primarily to provide coverage for:
• Basic Medicare supplement
• Basic hospital expense
• Basic medical surgical expense
• Hospital confinement indemnity
• Major medical expense
• Disability income or related asset protection
• Accident only
• Specified disease or specified accident, or
• Limited benefit health
Life insurance policies that accelerate death benefits generally don’t qualify.

Workers’ Compensation Insurance
A self-employed individual can deduct the actual amount paid for workers’ compensation insurance coverage in Idaho, if the cost isn’t deducted elsewhere.
Bonus Depreciation
If you claimed the bonus depreciation for federal purposes for property acquired before 2008 or after 2009:
• 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
• If the federal depreciation (including gains and losses) is less than the Idaho depreciation (including gains and losses), include the difference on this line; otherwise, enter the difference on Part A, line 5
Include on this line your distributive share of bonus depreciation from Form ID K-1, Part IV, Column B, line 27.
Don’t enter any amounts for property acquired during 2008 and 2009.

First-time Home Buyer Savings Account
You can contribute up to $15,000 ($30,000 if married filing a joint return) to a first-time home buyer savings account and deduct the contribution. Deposits into a first-time home buyer savings account can’t exceed $100,000 for the lifetime of the account.
A first-time home buyer savings account is established in Idaho with a bank, savings and loan association, credit union, or trust company authorized to act as a fiduciary. The account is established to pay the eligible home costs of the account holder or to reimburse the account holder’s eligible home costs in connection with a qualified home purchase.
Include interest earned on the account on line 22 but only if included on Form 40, line 7. Interest earned on the account is tax deferred if the funds are used for a qualified home purchase. Enter the name of the financial institution and your account number in the spaces provided.

Other Subtractions
Identify any other subtraction you’re eligible for, and claim the amount on this line. Include:
• Your distributive share of other subtractions from Form ID K-1, Part IV, Column B, line 28
• Charitable contributions not allowed on the federal return because of federal NOL limitations
• Interest from Idaho Build America Bonds that was included in federal adjusted gross income, Form 40, line 7
• Any Domestic Production Activities Deduction (DPAD) under Section 199A(g) allocated from an
agricultural or horticultural cooperative
• Amounts included in taxable income for funds received or loans forgiven according to Public Laws 116-136, 116-139, and 116-142 for COVID relief
Don’t include:
• Income earned in another state as a subtraction
• Foreign taxes as a subtraction, since they’re claimed as part of the Idaho itemized deduction, if allowable
• Any interest from non-Idaho Build America Bonds