WA - Idaho Investing - Property & Income Tax Impact?

Question

I live in Washington near the border to Idaho. I'm interested in investing in Idaho, but I have zero experience with Idaho taxes (or state income tax at all for that matter).

Questions:

• I've heard 	that property taxes in Idaho are higher for out of state owners vs. residents (i.e. a house could cost $2K in annual taxes for a resident, but may be $3K for an out-of-state owner). 		 Is this 		true or just rumor?If so, by 		what %?
• Is this 		true or just rumor?
• If so, by 		what %?
• Is my rental 	income from an Idaho property subject to Idaho state income tax? 		 If so, does 		Idaho state income tax impact my Federal tax return at all (i.e. taxed twice?)
• If so, does 		Idaho state income tax impact my Federal tax return at all (i.e. taxed twice?)
• Are there any 	other cross-state pros or cons for investing from WA -> ID?

• Is this 		true or just rumor?
• If so, by 		what %?

• If so, does 		Idaho state income tax impact my Federal tax return at all (i.e. taxed twice?)

Natalie Kolodij · Answer

Your rental income earned in Idaho will be subject to Idaho state tax.

It won't cause any type of double tax. Only your rental income "earned" there will be subject to idaho state tax, not your WA earned income.

Keep in mind tax preparation fees as well as you grow as you will now have  state tax return needing to be filed as well as the federal.

Cody Fenske · Answer

Hi Eric, I'll leave the accounting question to the accountant. However, the property tax exemptions are in my world, so I'll chime in there. As people mentioned, the homeowner exemption is only if it is your primary residence, but it is a reduction to the taxes that you may not get and there is not an increased rate for you being out of state. May homes are already owned by someone out of state or used as a rental and none of those have the exemption either so you would see no difference if you purchased it. The exemption actually removes up to $125,000 of your assessed value or 50%, whichever comes first. It is important to know, this is on your assessed value, not your market value and that is where things get really neat with Idaho. Idaho is a non-disclosure state so the government has a very difficult time properly assessing property values and therefore the assessed value is often far less than market value, especially on older homes. I often find that the assessed value is dramatically under market value and it's not uncommon for me to see a $600,000 home that is assessed in the 300 or 400s. If you have your home assessed at 400k and you apply the exemption, you will now reduce the taxable value to 275k. That's why you cannot set a general rule. You need to handle it case by case since some people voluntarily disclose the value to the government thinking they have to, while others don't. This causes a huge range of taxes even between similar properties. Also, there are other exemptions as well that don't require it to be your main residence which likely won't be applicable for you, but they may. Like Stephan said, some agents are terrible and don't properly input the tax amount and exemption into the MLS and therefore the information doesn't syndicate to other sites. However, any of us agents worth our salt will vet that for our clients when buying so it won't be much of a problem for you. If you ever see properties and want to know the details, shoot me a message and I'll send you the current info. It isn't hard for me to pull up the current assessor records showing both tax amounts and current exemptions. Although I cover the panhandle from Lewiston Idaho to Canada, I can pull records for almost anywhere in the state.

Jack B. · Answer

Does this mean if I buy a house in Idaho as my primary residence and manage my Seattle area rentals from there (driving here as necessary) I won't owe Idaho income tax on my rental income?

Kyle Fickenwirth · Answer

@Eric F.

Hey, Eric. I live and invest in the Lewis-Clark Valley, but commute daily up to Pullman. If you’ve run into any other questions about investing Idaho, I’d love to help. There aren’t many of us investing in the Quad-Cities, so we better all stick together! Haha

Eric F. · Answer

Thanks everyone, this is good advice! Since my original post I picked up my first property in WA. However I do keep eyeing properties across the border and this has given me a confidence booster. Thank you!

Stephan O'Shaughnessy · Answer

I wish to ammend my previous statement.... homeowners in Idaho get 50% off their home assessed value ... but only up to $100K.

So when shopping for a house make sure to call the county to find out how much taxes are with out the exemption.  Don't trust what the taxes are on zillow or any mls listing as it may or may not have this exemption.  Many times realtors don't even know if a home has the exemption or not.  As an investor you will pay the non exempt amount since it will not be your primary residence!

Hope that helps!  :)

Stephan

Justin Hannah · Answer

i second what @Stephan O'Shaughnessy said.  i do not know if its exactaly 50% or not but i do know for example i owned a primary residence in eagle that i paid 340k for and the taxes were about 1700/ yr.  i also own three 4 plex buildings in mountain home each purchase price of 269k and taxes are about 4600/yr.  so the no owner occupied is much higher.

second question the answer i believe is Yes, if you have net rental income from a rental property located outside your home state, you will need to file a nonresident state income tax return in that other state (if you meet that nonresident states minimum filing requirements)  https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/i-got-rental-income-from-another-state-do-i-have-to-file-income-tax-for-that-state/00/316523

i currently live in ca and had to pay a small idaho income tax for my properties there

and no i dont think you are not taxed twice

as far as other pros or cons... id say you can pretty much find property to invest in no matter where you are.  so your reasons for buying in idaho just have to add up for you.  the only thing i think about is possibly a better return in different markets or better landlord tenant laws

Stephan O'Shaughnessy · Answer

I can help out with your first question:

In Idaho residents get one "50% off" coupon for their property taxes of their primary home.  So for a non residents or for investment properties the tax is essentially doubled.  If you find a listing that says the tax is $2000 a year you'll want to make sure to ask the owner or realtor if that is with or without the exemption.  If the previous owners have the exemption the tax will jump to $4000 the next year.

Hope that helps!

WA -> Idaho Investing - Property & Income Tax Impact?

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