The Idaho State Tax Commission has published revised income tax withholding formula/tables to reflect the retroactive decrease in the personal income tax rate effective January 1, 2024. The update also reflects an adjustment to the Idaho Tax Credit Allowance Table to reflect the lowered tax rate.

Earlier this year, Idaho Governor Brad Little signed into law H.B 521, which retroactive to January 1, 2024, reduces the state's flat personal income tax rate from 5.8% to 5.695% on taxable income over $2,500 ($5,000 for taxpayers filing a joint personal income tax return).

This is the third consecutive year that the Idaho legislature has retroactively lowered the state's income tax rates.

In 2022, H.B. 436 lowered the state's top personal income tax rate from 6.5% to 6.0% for taxpayers that earn $3,000 or more. H.B. 436 also lowered the tax rate from 3.1% to 3.0% for taxpayers earning at least $1,000 but less than $3,000 and eliminated the tax rate of 5.5% that applies to income of at least $4,000 but less than $5,000 effective January 1, 2022 (see Tax Alert 2022-1096).

In 2023, H.B. 1 implemented a flat personal income tax of 5.8% retroactive to January 1, 2023.

Ernst & Young LLP insights

Employers should implement the revised Idaho income tax withholding formula/tables as soon as possible and notify employees who may wish to update their Idaho Form ID W-4.