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Idaho Lowers 2025 State Income Tax Rate
May 13, 2025
At A Glance
- Idaho has reduced the state's individual income tax rate to 5.3%.
- The new rate goes into effect retroactively on January 1, 2025.
On March 6, 2025, Idaho Governor Brad Little signed HB 40, which reduces the state's individual income tax rate from 5.695% to 5.3% for payroll periods starting January 1, 2025. The new rate also applies to supplemental wages (e.g., bonuses, commissions, etc.) as the state allows such wages to be taxed at the same flat rate when paid separately from regular wages.
The revised Form ID W-4 reflects the state’s updated income tax withholding tables. Employees aren’t required to submit a new form solely because of the rate change, but they are encouraged to review their withholding if they experience life changes, such as income or family status.
Next Steps
Paylocity will immediately update the 2025 Idaho withholding rate moving forward. This reduction won’t require adjustments to withholding amounts in payroll, as employers won’t pay any excess tax collected from individuals as part of their income tax filing for tax year 2025.
Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney, or Advisor.
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