Idaho residents who have been in the state for more than two years can soon expect income tax rebates in the mail.
Idaho state legislators in May approved a bill that cuts $382.9 million in income taxes to residents, which included $220 million in one-time income tax rebates for residents and businesses. The Idaho State Tax Commission will begin to process those payments in August.
Gov. Brad Little, who included tax cuts as part of his budget recommendation to the Legislature, said the cuts were made possible by the state’s strong economy and record budget surplus of nearly $900 million.
“We’ve returned your tax dollars with our record budget surplus,” Little said in a news release Friday. “These tax cuts boost Idahoans’ prosperity, and they keep our tax rates competitive and our business climate vibrant.”
The Legislature’s new law on income tax also eliminated tax brackets. Before the new bill, an Idaho resident qualified for the highest income tax rate by making only $11,761 in taxable income.
The bill also cut taxes more for those with higher earnings. The Idaho Center for Fiscal Policy said the law shifts the tax burden onto residents with more modest incomes and makes the state’s income tax structure closer to a flat tax — when all residents pay the same rate, regardless of income levels.
“As a result, middle- and low-income households bear more of the cost of state services and pay a much higher share of their earnings in state taxes overall,” according to the center’s analysis.
Republican legislators pointed to a minimum rebate that allowed all residents to get payments, regardless of income. Several proponents said they believed those who actually paid the income tax deserve more of the break.
How Idaho will determine residents’ income tax rebates
Wealthier residents — who conceivably would owe more income tax — will get the largest rebates. The rebate will be 9% of the income tax a resident owed in 2019. Residents will receive a $50 rebate at minimum if their rebate amounts to less than that.
Those who didn’t owe any income tax will receive a minimum $50 per person and dependent. A family of four, for example, who didn’t owe any income taxes in 2019 would be eligible for a $200 rebate.
Some stipulations apply. Those who owe the state money will see that debt deducted from their rebates, according to the Idaho State Tax Commission. That includes unpaid child support, unemployment overpayments that residents received or court fines.
How to qualify for the income tax rebate
Those who filed 2019 and 2020 income tax returns with the state will be eligible for the rebates, as long as they also filed income tax returns or grocery credit refund returns those years.
Residents can still file their 2019 and 2020 individual income tax returns by Dec. 31. Those who weren’t required to file a tax return could also still file a grocery credit refund through the Income Tax Hub on tax.idaho.gov.
When to expect the rebate
Idaho State Tax Commission officials will begin to process payments on Monday, Aug. 2, in order of the dates they received the 2020 tax filings. About 70,000 payments will be issued every week, according to the commission, with the first batch of payments starting as early as next week.
Taxpayers who signed up for direct deposit for their 2020 tax filings will receive the payments directly in their bank accounts. Others will get paper checks.
Residents who asked for an extension until Oct. 15 on their tax filings will need to complete their 2020 income tax returns before they get their rebates.