Rental Property Taxes in Idaho (2026 Guide)
Idaho is a genuinely landlord-friendly state on income: a flat 5.30% rate and a 60% capital-gains deduction that reaches Idaho rental real property held over a year. But its property tax hides a trap — the homeowner’s exemption that halves an owner-occupant’s taxable value does not apply to rentals, so your rental pays on its full assessed value. Here is what Idaho landlords need for 2026.
In This Guide
1. Property Tax: No Homeowner’s Exemption for Rentals
This is the single most important Idaho landlord fact. Idaho’s homeowner’s exemption (Idaho Code 63-602G) exempts the lesser of 50% of market value or $125,000 from property tax — but only on an owner-occupied primary residence:
- Owner-occupied home — up to half the value (capped at $125,000) is exempt, so the owner is taxed on a much smaller base.
- Rental property — no exemption at all. A rental is taxed on its full assessed market value, the same identical home carrying a far larger taxable base.
The practical effect: while Idaho’s owner-occupied effective rate is often quoted around 0.6–0.7%, a rental loses the exemption entirely, so its effective property-tax rate runs noticeably higher than that headline figure on an otherwise identical house. Budget for the full assessed value, not the exemption-reduced figure homeowners see.
2. Income Tax: a Flat 5.30%
Idaho taxes individual income at a single flat rate of 5.30% (HB 40, 2025) — there are no brackets. Your net rental income flows onto the Idaho return and is taxed at that one rate. SheltrIQ’s engine applies 5.30%.
A flat rate makes Idaho planning simple: every additional dollar of taxable rental income costs the same 5.30%, and every deductible expense saves the same 5.30%. There is no bracket creep to time around.
3. The 60% Capital-Gains Deduction
Idaho lets individuals deduct 60% of the net capital gain from “qualified property” (Idaho Code 63-3022H) — and rental real estate can qualify. Qualified property includes real property with an Idaho situs held at least 12 months, which squarely covers an Idaho rental held more than a year. With only 40% of the gain taxed, the effective top rate on a qualifying long-term gain is about 2.12% (5.30% × 0.40).
Two limits to respect: (1) gain the IRC treats as ordinary income — notably §1245/§1250 depreciation recapture — does NOT qualify for the deduction; only the true capital-gain portion does. (2) The deduction is reduced (not below zero) by any federal capital-gains deduction on the same property. So model the recapture and the capital-gain layers separately.
4. Bonus Depreciation Add-Back
Although Idaho conforms to the Internal Revenue Code in effect on January 1, 2025 (Idaho Code 63-3004), it does not conform to federal bonus depreciation under §168(k) and requires an add-back (Idaho Code 63-3022O). You keep the bonus federally but reverse it for Idaho and depreciate on the regular schedule, so your Idaho basis differs from your federal basis. Keep a separate Idaho depreciation schedule so the two reconcile year to year.
5. No Real Estate Transfer Tax
Idaho has no real estate transfer tax. The legislature expressly prohibited it (Idaho Code 63-307A): neither the state nor any political subdivision may impose a real-estate-transfer or excise tax on the transfer of real property, and sales-price data collected for assessment may not be used to levy one. Buying or selling an Idaho rental carries no percentage transfer or deed tax — only ordinary recording fees.
6. LLC Annual Report (Free, but Mandatory)
An Idaho LLC must file an annual report with the Secretary of State every year, due by the end of the LLC’s anniversary month — but the filing fee is $0. It is one of the few states with a free annual report. Do not skip it because it is free: an Idaho LLC that fails to file is administratively dissolved, which can break your liability shield. File it through the SOSBiz portal on time, every year.
7. Rent Control
Idaho prohibits local rent control statewide (Idaho Code 55-307) — no local government may enact, maintain, or enforce an ordinance that controls the rent charged for private residential property. You set rents at market. Note the related notice rule in the same statute: a landlord must give written notice of any rent increase or non-renewal at least 30 days in advance.
8. Security Deposit Rules
- No statutory cap on the deposit amount (Idaho Code 6-321).
- Return within 21 days if the lease fixes no time — and in any event within 30 days after the tenant surrenders the premises if the lease specifies a longer period.
- Itemize deductions — any refund for less than the full deposit must include a signed statement itemizing the amounts retained, the purpose, and a detailed list of expenditures. You may not withhold for normal wear and tear.
9. How SheltrIQ Helps Idaho Landlords
Idaho’s flat rate is simple, but the deductions and basis differences are where the money is — SheltrIQ keeps your return on the current rules:
- Flat-rate income modeling — applies Idaho’s 5.30% rate to your net rental income with no bracket guesswork.
- Disposition modeling — applies the 60% capital-gains deduction to the qualifying long-term gain on an Idaho rental held over a year, while keeping depreciation recapture taxed at the full rate.
- Bonus-depreciation tracking — flags the Idaho §168(k) add-back and keeps a separate Idaho depreciation basis so federal and Idaho reconcile.
- AI Schedule E classification — sorts each expense to the right line so your Idaho income starts from an accurate federal return.
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