Idaho capital gains tax on real estate starts at the flat 5.3% income tax rate, then Idaho lets you deduct 60% of the capital gain from Idaho real property held at least 12 months, so the effective state rate is about 2.1%. That makes a 1031 exchange in Idaho mostly about the federal tax, plus one planning question the other states do not have: whether the replacement property will keep qualifying for Idaho's deduction.
Reviewed by Jon Hilley, CEO & Founder of 1031 Specialists. Last reviewed September 29, 2026.
| State tax on real estate gains | Flat 5.3% on taxable income above $4,811 single / $9,622 joint (2025 schedule) |
|---|---|
| Long-term capital gains treatment | 60% deduction for gain on Idaho real property held 12 months or more (Form CG) |
| Nonresident withholding at closing | None for individual sellers |
| Withholding form | Not applicable. Nonresidents report the sale on Form 43 |
| Transfer or conveyance tax (a 1031 does not defer it) | None. Only county recording fees |
| Clawback on out-of-state replacement property | None |
| Conforms to Section 1031 | Yes. Idaho adopted nearly all 2025 federal changes in 2026 |
Table of contents
- How much is capital gains tax on real estate in Idaho?
- Idaho tax on a $300,000 gain: worked example
- Does Idaho withhold tax from nonresident sellers?
- Idaho transfer taxes: none
- Conformity and clawback in Idaho
- Keeping Idaho's 60% deduction through an exchange
- Moving into or out of Idaho
- Where Idaho 1031 exchanges happen
- Federal 1031 rules that apply in Idaho
- Common Idaho 1031 exchange mistakes
- Start your Idaho 1031 exchange
- Frequently asked questions
- Sources
How much is capital gains tax on real estate in Idaho?
Idaho taxes capital gains as ordinary income at a single flat rate. House Bill 40 cut the rate to 5.3% effective January 1, 2025, and the State Tax Commission's schedule applies it to taxable income above $4,811 for single filers and $9,622 for joint filers. The Commission had not posted a separate 2026 schedule when this page was reviewed, so check the current rate before you file.
The feature that sets Idaho apart is the capital gains deduction. You may deduct 60% of the capital gain net income from the sale of qualifying Idaho property, which includes real property located in Idaho and held for at least 12 months. You claim it on Form CG. Real property outside Idaho, stocks, bonds and partnership interests do not qualify, and gains treated as ordinary income under the federal rules are excluded.
For a typical rental with straight-line depreciation, the unrecaptured §1250 portion is still a capital gain federally (taxed at up to 25%), so it generally counts toward the Idaho deduction. There are no city or county income taxes in Idaho.
Federal tax applies on top: 20% on long-term gain above $613,700 joint taxable income in 2026 ($545,500 single), up to 25% on recapture, and 3.8% net investment income tax above $250,000 joint MAGI ($200,000 single).
Idaho tax on a $300,000 gain: worked example
Assumptions: a $300,000 long-term gain on an Idaho investment property held more than 12 months, $100,000 of it unrecaptured §1250 depreciation, a married couple filing jointly in the top federal bracket. The full gain qualifies for the 60% Idaho deduction.
| Line | Math | Tax |
|---|---|---|
| Unrecaptured §1250 gain (federal) | 25% x $100,000 | $25,000 |
| Long-term capital gain (federal) | 20% x $200,000 | $40,000 |
| Net investment income tax | 3.8% x $300,000 | $11,400 |
| Federal subtotal | $76,400 | |
| Idaho capital gains deduction | 60% x $300,000 = $180,000 deducted | |
| Idaho income tax | 5.3% x ($300,000 - $180,000) = 5.3% x $120,000 | $6,360 |
| Total deferred by a full 1031 exchange | $82,760 |
Without the deduction (for example, an Idaho resident selling a rental in another state), the Idaho line would be 5.3% x $300,000 = $15,900. Run your recapture numbers in the depreciation recapture calculator, and see how the math compares with paying the tax in our capital gains vs. 1031 exchange comparison.
Does Idaho withhold tax from nonresident sellers?
No. Idaho does not require the title or escrow company to withhold state income tax when an individual nonresident sells Idaho real estate, so the full proceeds can go to your qualified intermediary. The tax obligation does not disappear, though: a nonresident must file an Idaho return when Idaho-source gross income exceeds $2,500, and a taxable property sale easily crosses that line. Nonresidents and part-year residents file Form 43 and can claim the capital gains deduction on Idaho property.
In a fully deferred exchange there is no recognized Idaho gain to report as income. Foreign sellers still face federal FIRPTA withholding; see our guide for foreign sellers of U.S. property.
Idaho transfer taxes: none
Idaho has no state or local real estate transfer tax, excise tax or documentary stamp tax. Closing costs are limited to title insurance, escrow fees and county recording fees. Compare that with Washington next door, where the seller of a $1 million property pays about $11,855 in state REET before any local tax. For investors moving capital from Spokane or Seattle into Coeur d'Alene or Boise, the absence of a transfer tax on the purchase side and on a future sale is part of the appeal.
Conformity and clawback in Idaho
Idaho starts its income tax from federal taxable income and follows Section 1031, so a valid federal exchange defers the Idaho tax. In February 2026 the governor signed a bill adopting nearly all of the 2025 federal tax changes, keeping Idaho aligned with the Internal Revenue Code.
Idaho does not claw back deferred gain. There is no annual tracking form like Oregon's Schedule OR-24 or California's FTB 3840. If you exchange an Idaho rental into a property in Texas and move there, Idaho has no claim when you later sell. If you stay an Idaho resident, Idaho taxes the eventual gain because it taxes residents on all income, but without the 60% deduction if the property is outside Idaho.
Keeping Idaho's 60% deduction through an exchange
The deduction is only available on a taxable sale, so it interacts with an exchange in two ways.
- Exchange out of state and you lose it later. An Idaho resident who trades a Boise fourplex for an Arizona retail building will eventually sell property that is not located in Idaho. The deferred gain from the fourplex then gets taxed at the full 5.3%, not the reduced rate, as long as you still live in Idaho.
- Stay in Idaho and the deduction should follow. Replacement property in Idaho is again Idaho real property. Confirm with your CPA how the 12-month holding period is measured for the replacement, since the federal holding period of exchanged property generally includes the time you held the property you gave up.
Because the deduction already lowers the state tax to about 2.1% of the gain, a small seller may decide the Idaho portion alone does not justify an exchange. The federal portion, $76,400 on our example, almost always does. If you want to keep real estate exposure without management, a Delaware Statutory Trust is one option, though a DST holding out-of-state property raises the same deduction question.
Moving into or out of Idaho
Coming from a clawback state. Idaho draws many investors from California and Oregon. If you exchanged property there into Idaho, the old state keeps tracking the deferred gain: Oregon through Schedule OR-24 each year and California through FTB 3840. When you sell the Idaho replacement, both Idaho (as your home state) and the old state may claim part of the gain, and credits sort out the overlap.
From Washington. Washington does not tax real estate gains, so a Washington exchange into Idaho brings no clawback. Once you are an Idaho resident, though, future gains are taxed by Idaho.
Selling Idaho property as a nonresident. The gain is Idaho-source. You file Form 43 and can use the 60% deduction if the property qualifies, which makes Idaho one of the lighter states in which to recognize a gain.
Where Idaho 1031 exchanges happen
The Treasure Valley (Boise, Meridian, Nampa) is the largest exchange market, with single-family rentals, small multifamily and industrial property changing hands as the metro grows. North Idaho is the second hub, driven by buyers from Spokane and the Puget Sound; see our page on the 1031 exchange in Coeur d'Alene. In eastern Idaho, our guide to the 1031 exchange in Idaho Falls covers the market near the Idaho National Laboratory. Ranch and recreational land around Sun Valley and McCall also trades through exchanges, which is allowed because land is like-kind to improved real estate.
Federal 1031 rules that apply in Idaho
Name replacement property in writing within 45 days of closing and complete the purchase within 180 days. A qualified intermediary holds the funds so you never have access to them. Reinvest all net proceeds and match the debt you retire, or the shortfall is taxable boot. Our 1031 exchange guides cover the details, the 45-day identification validator checks your list, and the partial 1031 boot calculator shows the cost of taking cash out.
Common Idaho 1031 exchange mistakes
- Selling before the 12-month mark. Idaho's deduction requires real property held at least 12 months. A quick flip loses both the deduction and the federal long-term rate, and property held mainly for resale does not qualify for a 1031 at all.
- Exchanging out of Idaho without pricing the lost deduction. If you stay an Idaho resident, the eventual sale of out-of-state property is taxed at the full 5.3%.
- Assuming no withholding means no return. Nonresidents with more than $2,500 of Idaho gross income file Form 43, including in years with a taxable partial exchange.
- Carrying a California or Oregon clawback into Idaho without records. Keep the original exchange paperwork and basis records; the old state still expects its share.
- Treating a second home as investment property. A Coeur d'Alene or McCall cabin used mostly by the family is not held for investment. Rent it at fair value and limit personal use before you rely on a 1031.
Start your Idaho 1031 exchange
We work with title companies across Idaho. Contact us once you have a buyer so we can prepare the exchange agreement before closing, hold your proceeds, and track the 45-day and 180-day dates. Start your exchange online or book an intro call.
Frequently asked questions
How can I avoid capital gains tax on real estate in Idaho?
Idaho already reduces the tax with a 60% deduction for gain on Idaho real property held at least 12 months, leaving an effective state rate of about 2.1%. To defer the rest, including the federal tax, complete a 1031 exchange into like-kind investment property through a qualified intermediary.
What is the Idaho capital gains tax rate on real estate?
Idaho taxes gains as ordinary income at a flat 5.3%, the rate set by House Bill 40 starting in 2025. With the 60% capital gains deduction for qualifying Idaho real property, only 40% of the gain is taxed.
Does Idaho withhold tax when a nonresident sells property?
No. Idaho has no state withholding requirement on real estate sales by individual nonresidents. Nonresidents with more than $2,500 of Idaho-source gross income must still file an Idaho return, Form 43.
Does Idaho have a real estate transfer tax?
No. Idaho has no state or local transfer tax on real estate sales. Sellers pay only normal closing costs and recording fees.
Can I still take the Idaho capital gains deduction after a 1031 exchange?
The deduction applies when you sell in a taxable sale. If the replacement is Idaho real property held long enough, it should qualify. If you exchanged into property outside Idaho and remain an Idaho resident, the later gain is taxed without the deduction.
Does Idaho have a 1031 clawback like Oregon or California?
No. Idaho does not require annual reporting of out-of-state replacement property and does not tax the deferred gain after you move away. Clawback rules from other states can still follow property you bring into Idaho.
Sources
- Idaho State Tax Commission: Individual income tax rate schedule
- Idaho State Tax Commission: Capital gains deduction
- Idaho Form CG: Capital gains deduction (2025)
- Idaho State Tax Commission: Individual income tax basics and filing requirements
- Idaho Form 43: Part-year resident and nonresident return
Related: Washington, Oregon, Montana, Utah, and all 50 states.
This overview of Idaho and federal rules is for general information only and is not tax or legal advice. Talk to your CPA about your specific sale.
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