If you're an Idaho resident, military retirement or pension income that's included in your federal taxable income is generally taxable by Idaho. However, Idaho may allow you to reduce or eliminate the taxable amount through the Retirement Benefits Deduction if you meet certain requirements.
How Idaho Taxes Military Retirement Income
Idaho starts with your federal taxable income when calculating your state tax. That means military retirement income that's taxable on your federal return is generally taxable on your Idaho return as well.
Idaho doesn't provide a blanket exemption for military retirement income. Instead, eligible taxpayers may claim the Retirement Benefits Deduction, which is a subtraction from income.
Who Qualifies for the Retirement Benefits Deduction?
To qualify as a retired service member, you must receive qualifying military retirement benefits included in your federal taxable income and meet at least one of the following requirements:
- Be age 62 or older.
- Be classified as disabled, regardless of age.
- Be under age 62, employed during the year, and earn enough income to be required to file a federal income tax return.
An unremarried surviving spouse receiving qualifying survivor benefits may also qualify if the applicable requirements are met.
Married Taxpayers
Generally, married taxpayers must file a joint Idaho return to claim the Retirement Benefits Deduction. Taxpayers who file Married Filing Separately generally don't qualify.
Are There Deduction Limits?
Yes. The Retirement Benefits Deduction is subject to Idaho limitations.
For 2026, the maximum deduction amounts are:
| Filing Status | Maximum Deduction |
|---|---|
| Single | $49,824 |
| Married Filing Jointly | $74,736 |
These limits may be reduced by Social Security benefits, Railroad Retirement benefits, and other factors. The deduction can't exceed the amount of qualifying retirement income included in federal taxable income.
Retirement Benefits Deduction vs. Exemption
It's important to understand that the Retirement Benefits Deduction is:
- A subtraction from income
- Not a full exemption from tax
- Not automatically applied
You must enter the information in the Idaho return to determine whether you're eligible and calculate the allowable deduction.
How to Enter the Retirement Benefits Deduction
Program Entry
- Select State from the left-side menu.
- Click the three dots (...) next to Idaho and select Edit.
- Select Deductions from Income.
- Select Retirement Benefits Deduction.
- Enter the qualifying military retirement income included in your federal return.
The program will determine the allowable Idaho deduction based on the information entered and the applicable limits.
Important Reminder
Military retirement income remains taxable to Idaho unless you qualify for and claim the Retirement Benefits Deduction. Before e-filing, review the PDF copy of your Idaho return to verify that any qualifying retirement deduction appears correctly on the return.