Yes, Idaho has a capital gains tax. The state treats capital gains as ordinary income and taxes them at a flat 5.3 percent for tax year 2025, but a deduction under Idaho Code Section 63-3022H lets you subtract 60 percent of the gain on qualifying Idaho property, which can drop your effective rate well below what you pay on wages.1Idaho State Legislature. Idaho Code Section 63-3022H – Deduction of Capital Gains
The Rate You Actually Pay
Idaho does not use a separate long-term capital gains rate the way the federal government does. All gains fold into your regular taxable income. Because your Idaho return starts from the federal adjusted gross income on your Form 1040, any gain you recognized federally carries over automatically.2Idaho State Tax Commission. Form 40 Individual Income Tax Return
For 2025 returns, the flat rate is 5.3 percent. The first $4,811 of taxable income for single filers and $9,622 for joint filers sits in a zero-rate bracket. Everything above those amounts, including capital gains, is taxed at 5.3 percent unless a deduction applies.
The 60 Percent Deduction
The biggest break Idaho offers on gains is a subtraction equal to 60 percent of the net capital gain from the sale of qualifying Idaho property.1Idaho State Legislature. Idaho Code Section 63-3022H – Deduction of Capital Gains Only 40 percent of an eligible gain reaches your Idaho taxable income. On a $100,000 qualifying gain, you deduct $60,000 and pay Idaho tax on $40,000, which comes to about $2,120 instead of $5,300.
The deduction applies after you net all gains and losses for the year. It is purely an Idaho subtraction and does not affect your federal tax.
What Property Qualifies
The property has to have had an Idaho location at the time of sale (the statute calls this “Idaho situs”), fall into one of the listed categories, and meet a minimum holding period.1Idaho State Legislature. Idaho Code Section 63-3022H – Deduction of Capital Gains
- Real property in Idaho, held at least 12 months.
- Tangible personal property used in a revenue-producing Idaho business for at least 12 months, such as farming equipment or manufacturing tools.
- Cattle and horses held in Idaho for breeding, draft, dairy, or sporting purposes for at least 24 months.
- Other breeding livestock, including sheep, goats, and hogs, held in Idaho for at least 12 months.
- Timber grown in Idaho and held at least 24 months.
Two details catch people. Cattle, horses, and timber all require 24 months, not 12. And the Idaho situs rule means that real estate located in another state does not qualify even if you are an Idaho resident. Sell a rental in Oregon and the gain lands on your Idaho return at the full 5.3 percent with no 60 percent reduction available.
What Does Not Qualify
Intangible assets are excluded. That covers publicly traded stocks, bonds, mutual funds, and similar financial instruments.3LII / Legal Information Institute. Idaho Admin. Code r. 35.01.01.171 – Idaho Capital Gains Deduction – Qualified Property Shares in an Idaho-based company still do not qualify because the shares themselves are intangible. Those gains are taxed at the full 5.3 percent rate.
Selling Your Home in Idaho
Because the Idaho return begins with your federal adjusted gross income, the federal exclusion for a primary residence sale flows straight through. Federal rules let you exclude up to $250,000 in gain, or $500,000 for married couples filing jointly, if you owned and lived in the home for at least two of the five years before the sale.4Idaho State Tax Commission. Tax Commission Decision Regarding IRC Section 121 Exclusion Excluded gain never hits your federal AGI, so it never hits Idaho either.
If your gain is larger than the exclusion, only the excess shows up on your Idaho return. A single filer with a $350,000 profit would carry $100,000 to Idaho. That remainder can then qualify for the 60 percent deduction if the home meets the real property situs and 12-month holding rules, leaving $40,000 taxable in Idaho.
If You Have Losses
When your capital losses exceed your gains, Idaho mirrors the federal limit. You can deduct up to $3,000 of net capital losses against other income, or $1,500 if married filing separately, and anything beyond that carries forward.5Cornell Law School. Idaho Admin. Code r. 35.01.01.254 – Nonresident and Part-Year Resident Individuals – Subtractions Allowed in Computing Idaho Adjusted Income Since Idaho starts from federal AGI, that limitation is already baked in before you touch the state return.
If You Live Out of State
Non-residents and part-year residents who sell Idaho property owe Idaho tax on the gain and file Form 43. Reportable gains include sales of capital assets located in Idaho, sales made while residing in Idaho, and installment payments received while an Idaho resident.6Idaho State Tax Commission. Form 43 Part-Year Resident and Nonresident Income Tax Return Instructions
Non-residents can still claim the 60 percent deduction if the property meets the usual situs, category, and holding requirements. The amount flows through Form CG to Form 39NR instead of Form 39R.
Installment Sales
If you sell qualifying property on installments and report the gain over several years on federal Form 6252, Idaho lets you apply the 60 percent deduction to each year’s taxable portion as payments come in.7Idaho State Tax Commission. Form CG Capital Gains Deduction You do not have to take the whole deduction in the year of sale. The property still has to have met the holding period by the closing date; you cannot run out the clock during the installment years.
How to Claim the Deduction
Complete Idaho Form CG and attach it to your return.8Idaho State Tax Commission. Capital Gains Form CG calculates the deductible amount by comparing your qualifying gains to your total capital gain net income. The result moves to Form 39R for residents or Form 39NR for non-residents and part-year residents, where it reduces income on your Form 40 or Form 43.
Keep records of acquisition dates, sale dates, and how each asset was used. The holding periods are enforced strictly, and the Idaho State Tax Commission can ask for documentation during an audit. If the gain came through a pass-through entity, you will need that entity’s schedule describing the property and its qualification before you can finish Form CG on your personal return.