Bill aiming to reduce income tax burden headed to Gov. Little’s desk

BOISE, Idaho (KMVT/KSVT) — A bill aiming to reduce Idaho’s income tax burden is headed to Gov. Little’s desk.

House Bill 40 passed the Idaho Senate on Tuesday by a vote of 27-8 and is now awaiting Gov. Little’s signature or veto. The bill projects a total reduction of $240 million in state General Fund revenue for fiscal year 2026.

According to the bill’s statement of purpose, the bill aims to reduce the state government’s income tax burden by lowering Idaho’s flat tax rate on people and businesses from 5.695% to 5.3%.

The bill also expands the income tax exemption on military pension income to include certain disabled veterans under 62, all veterans aged 62 to 64 and non-disabled veterans under 62 who are employed and earn sufficient income to owe federal taxes.

The bill also includes removing capital gains and losses for metal and monetized bullion from the state income tax calculation.

The Idaho House of Representatives passed the bill back on Feb. 3 in a 63-7 vote.