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Tax Year 2026Updated July 13, 2026

Does Idaho Tax Tips in 2026?

As of September 2026, Idaho has not issued official guidance on whether it recognizes the federal OBBBA tips deduction (IRC §224). Idaho generally conforms to the Internal Revenue Code and may adopt this deduction automatically, but the Idaho State Tax Commission has not explicitly confirmed it and Idaho retains the authority to decouple from specific federal provisions. The federal deduction still applies on your federal return regardless, saving up to $25,000 in taxable income.

How Idaho's Tips Tax Treatment Works

Idaho's individual income tax generally conforms to the Internal Revenue Code, using federal taxable income as a starting point and then applying Idaho-specific adjustments. This conformity approach means that many federal deductions – including above-the-line deductions that reduce AGI – typically flow through to Idaho's tax calculation automatically.

However, Idaho does not use blanket rolling conformity. The state has the authority to decouple from specific federal provisions, and the Idaho State Tax Commission or legislature can choose not to adopt particular IRC changes. For the OBBBA tips deduction (IRC §224), no explicit confirmation or rejection has been issued as of September 2026.

Idaho's flat 5.3% tax rate simplifies the potential impact calculation. If Idaho conforms, every dollar of tips deducted saves exactly 5.3 cents in Idaho tax – regardless of the worker's income level. For a worker claiming the maximum $25,000 deduction, that would mean $1,325 in Idaho state tax savings on top of the federal savings.

Federal Tips Deduction Quick Reference

DetailValue
IRC Section§224 (OBBBA)
Maximum deduction$25,000 tips
Deduction typeAbove-the-line (Schedule 1-A)
FICA still applies?Yes (Social Security 6.2% + Medicare 1.45%)
MFS eligible?No (MFJ or Single/HoH only)
Effective datesJan 1, 2025 – Dec 31, 2028
Idaho treatmentDoes not conform

Worked Examples Comparing Federal and Idaho Treatment

Example 1: Restaurant server (single filer, $40,000 income, $15,000 in tips)

Federal return:
Qualified tip income: $15,000
Tips deduction claimed: $15,000 (capped at $25,000)
Estimated federal tax savings: $1,800.00

Idaho return:
Idaho has not confirmed whether it conforms to the OBBBA tips deduction. If Idaho conforms (consistent with its general IRC conformity approach), the flat 5.3% rate would yield approximately $795 in state savings ($15,000 x 5.3%). If Idaho decouples, the full $15,000 remains subject to Idaho income tax.

Example 2: Bartender (single filer, $70,000 income, $25,000 in tips - federal cap reached)

Federal return:
Qualified tip income: $25,000
Tips deduction claimed: $25,000 (capped at $25,000)
Estimated federal tax savings: $5,500.00

Idaho return:
Idaho has not confirmed conformity to the OBBBA tips deduction. If Idaho conforms, the flat 5.3% rate would yield approximately $1,325 in state savings ($25,000 x 5.3%). If Idaho decouples, the full $25,000 in tips remains taxable at 5.3%.

Idaho's Flat Tax and Tips Income

Idaho moved to a flat 5.3% income tax rate, replacing its previous graduated bracket system. This simplification means the tips deduction question has a straightforward answer in dollar terms: if Idaho conforms, the savings equal exactly 5.3% of the deducted amount. There is no bracket-dependent variation.

General conformity history: Idaho has a track record of generally conforming to federal tax changes, though it has decoupled from select provisions in the past. The state's conformity approach uses federal taxable income as a starting point, which typically means above-the-line deductions like IRC §224 flow through. However, the revenue impact of the OBBBA tips deduction could factor into whether Idaho chooses to decouple.

Idaho's economy: While Idaho's hospitality and tourism sector (Sun Valley, Boise dining, Coeur d'Alene resort areas) employs a notable number of tipped workers, Idaho's economy is more diversified than tourism-dependent states. The tips deduction would primarily benefit workers in Idaho's growing restaurant and hospitality industry.

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Frequently Asked Questions

Does Idaho conform to the federal 'no tax on tips' deduction under the OBBBA?
As of September 2026, Idaho has not issued explicit guidance on whether it conforms to the OBBBA tips deduction (IRC §224). Idaho generally conforms to the Internal Revenue Code and uses federal taxable income as a starting point, but it has the authority to decouple from specific federal provisions. The Idaho State Tax Commission has not yet addressed this particular deduction.
Why might Idaho automatically conform to the federal tips deduction?
Idaho generally conforms to the IRC and uses federal taxable income as the starting point for Idaho income tax calculations. This conformity approach means many federal deductions automatically flow through to Idaho. However, Idaho has decoupled from certain federal provisions in the past, so conformity is not guaranteed until the Tax Commission or legislature confirms it.
What is Idaho's income tax rate on tip income?
Idaho has a flat income tax rate of 5.3% on all taxable income. This simplifies the calculation: if Idaho conforms to the tips deduction, the state savings would be exactly 5.3% of the deducted amount. For the maximum $25,000 deduction, that would be $1,325 in Idaho tax savings.
How does Idaho's flat tax affect the tips deduction calculation?
Idaho's flat 5.3% rate means the state tax savings from a tips deduction would be the same regardless of your income level – unlike graduated-rate states where the savings depend on your marginal bracket. Every dollar of tips deducted saves exactly 5.3 cents in Idaho tax, making the calculation straightforward.
Do I still get the federal tips deduction if I live in Idaho?
Yes. The federal tips deduction under IRC §224 applies on your federal Form 1040 regardless of where you live. You can deduct up to $25,000 in qualified tip income from your federal AGI. The open question is only whether Idaho will also recognize this deduction on your state return.
When will Idaho confirm whether it conforms to the OBBBA tips deduction?
There is no set timeline. The Idaho State Tax Commission may issue guidance before the 2026 filing season, or the Idaho Legislature may address conformity during its next session. Idaho has a history of generally conforming to federal changes, but explicit guidance is needed for taxpayers to rely on state-level savings. We will update this page when official guidance is released.