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H 605

TAXATION – Amends and adds to existing law to provide certain deductions to income taxes and to provide for an increased food tax credit for seniors.

68th Legislature, 2nd Regular Session (2026)

H 605 would allow Idaho to subtract qualified tips and overtime pay for 2026–2028, expand the food tax credit (plus a senior boost and an optional actual-sales option), and share d

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Bill Summary · H 605

Overview

House Bill 605 (H 605), introduced in Idaho’s 68th Legislature (2026), would implement several tax relief measures in Idaho for taxable years 2026–2028, including:

  • an Idaho deduction for qualified tips and the premium portion of qualified overtime compensation (aligned with federal tax code provisions),
  • an enhanced and reformatted food tax credit for Idaho residents, including a senior-specific increase and an optional alternative based on actual statewide food sales tax paid,
  • adjustments to help enforce credits (information sharing with corrections and welfare agencies) to prevent improper claims,
  • retroactive effective date to January 1, 2026, with an emergency clause.

Main Purpose and Intent

  • Provide targeted tax relief and modernize Idaho’s tax code to reflect recent federal provisions on tips and overtime pay.
  • Increase financial support for seniors by boosting the grocery/food tax relief.
  • Improve administration and compliance around the Idaho food tax credit by coordinating information with the Department of Corrections and the Department of Health and Welfare.

Key Provisions

A. Subtractions for Qualified Tips and Overtime (63-3022W)

  • For tax years starting on or after January 1, 2026 and ending before January 1, 2029:
    • Idaho taxable income may subtract:
    • (a) The amount of qualified tips received (as defined in federal code section 224 and related tax code), subject to applicable limits and phase-outs.
    • (b) The premium portion of qualified overtime compensation (as defined in federal code section 225 and related provisions), subject to limits and phase-outs.
  • The Idaho State Tax Commission may issue rules to implement these deductions, with legislative approval.

B. Food Tax Credits and Refunds (63-3024A)

  • Existing structure retained but updated; key changes include:
    • For 2022: credit of $100; 2023–2024: $120; 2025 onward: $155 per eligible person (the taxpayer, spouse, and each dependent as defined by IRC 152, and under certain court-awarded eligibility).
    • If taxes due are less than the credit, the excess is refunded.
  • Additional senior credit:
    • Residents age 65+ who claim the base credit get an extra $50 credit against Idaho taxes due (or a refund if applicable). This is in addition to the base credit.
  • Eligibility and limitations:
    • Credits/refunds limited to Idaho residents with personal exemptions claimed for Idaho taxes.
    • If benefits or incarceration status affects eligibility, credits are prorated accordingly (months of the year not receiving assistance or not incarcerated).
    • No credit/refund for individuals residing illegally in the United States.
    • Part-year residents receive a proportionate credit.
  • Optional election to claim a credit based on actual sales tax paid on food purchases (instead of the flat credit), up to $250 per person, with documentation requirements (scanned receipts) and similar refund mechanics if applicable.
    • The “food” definition aligns with federal SNAP-eligible foods, excluding items like candy and soda (with specific definitions and exclusions for candy, soda, restaurant sales, heated foods, mixed-ingredient items, and certain utensils or packaging).

C. Information Sharing for Compliance (63-3077G and 63-3077H)

  • New/updated agreements:
    • With Idaho Department of Correction: to exchange data on incarceration status and whether the food tax credit was claimed (to detect improper claims).
    • With Idaho Department of Health and Welfare: to exchange data on receipt of federal food stamp benefits and food tax credit claims.
  • Information shared is confidential and limited to identifying potential improper credit claims; not public except in judicial proceedings. Privacy protections per applicable laws.

D. Administrative and Effective Date

  • The act contains an emergency clause and is retroactive to January 1, 2026.
  • The state tax commission is given regulatory authority to implement these provisions.

Affected Parties

  • Idaho residents with:
    • Reported tips and overtime income (allowing a deduction for federal-qualified tips and overtime premium).
    • Eligibility for the Idaho food tax credit, including seniors (65+), and those qualifying under court orders or dependent definitions.
  • Taxpayers choosing the sales-tax-paid-on-food alternative, who must maintain receipts and elect this option on their return.
  • State agencies:
    • Idaho State Tax Commission (implementation, rules, administration, audits/refunds).
    • Idaho Department of Correction (inmate data interchanges for credit compliance).
    • Idaho Department of Health and Welfare (verification against SNAP benefits and related credits).

Procedural/Timelines

  • Effective for tax years 2026–2028 (with retroactive application to Jan 1, 2026).
  • Tentative sunset not specified; provisions would be evaluated for continuation after 2028 unless extended.
  • Administration rules may be issued by the Idaho State Tax Commission, subject to legislative approval.
  • Refund provisions mirror existing Idaho refund mechanisms; special provisions for refunds if credits exceed tax due.

Fiscal Note (as provided by proponents)

  • Estimated total net fiscal impact: about $85 million.
    • Tips deduction: roughly $10.7–$22 million (average around $16 million, per Tax Foundation/Idaho Tax Commission estimates).
    • Overtime deduction: roughly $36–$73 million (average around $55 million).
    • Grocery tax credit increase for seniors: about $14 million (based on 2023 participation estimates of around 280,000 individuals).
  • These figures represent a proponent's fiscal outlook and may differ from enacted costs.

Summary

H 605 seeks to provide targeted tax relief by allowing Idaho to subtract qualified tips and overtime pay from income for the 2026–2028 period, expand and adjust the food tax credit—with a higher base credit and a senior-specific $50 boost, and an optional alternative that credits actual food sales tax paid—while tightening administration to prevent improper claims through information sharing with corrections and welfare agencies. The measure is retroactively effective to January 1, 2026 and includes an emergency clause, signaling urgency in implementing these changes.

Compiled from official sources — confirm details with the bill’s official record.

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