Idaho generally taxes retirement income. However, Idaho allows a limited Retirement Benefits Deduction if the taxpayer meets both parts of the state’s qualification requirements and receives qualified retirement benefits.
➖ Idaho Retirement Benefits Deduction (Non‑Military)
To claim this deduction, the taxpayer must meet the requirements of Part 1 (Eligibility) and Part 2 (Qualified Benefits).
✅ Part 1: Age, Disability, and Filing Status Requirements
The recipient of the retirement benefits must meet one of the following:
- 🎂 Be age 65 or older, or
- ♿ Be classified as disabled and at least age 62
Additional requirements:
- 👥 Married taxpayers must file a joint Idaho return
- ❌ The deduction is not allowed if married filing separately
- 🕊️ Un‑remarried surviving spouses receiving qualifying survivor benefits may claim the deduction if they meet the same age or disability requirements
✅ Part 2: Qualified Retirement Benefits (Non‑Military)
The retirement income must come from one of the following sources:
- 🏛️ Federal Civil Service Retirement
- Civil Service Retirement System (CSRS)
- Foreign Service Retirement and Disability System (FSRDS)
- CSRS or FSRDS offset programs
- 🚒 Idaho Firefighters’ Retirement Fund
- 🚓 Qualified Idaho City Police Officer Retirement Plans
- Including certain PERSI‑administered plans that no longer admit new members
⚠️ Most common retirement income does NOT qualify, including:
- IRAs
- 401(k)s / 403(b)s
- SEP or SIMPLE plans
- Private employer pensions
- Annuities not specifically listed above
❗ Important Clarification
- ❌ Military retirement income follows different rules and is not covered by this article
- ✅ Military retirement income eligibility is addressed separately due to expanded rules enacted in 2025
🧭 How to Enter the Deduction (If Eligible)
- 📍 Go to State Section
- ➖ Select Deductions from Income
- 🧾 Choose Retirement Benefits Deduction
- 🧮 Enter the qualifying retirement income included in the federal return