Retirees across Idaho entered tax-season caution and instead found a welcome surprise: many can now slash about $6,000 from their taxable income. This isn’t campaign rhetoric—it’s the outcome of a new federal rule that eliminates Social Security taxes for the majority of seniors. And in Idaho, thanks to longstanding state rules, the benefit lands like a direct deposit for thousands of households.
The Background in Boise
The story was first brought to life locally by CPA Madison Karayiannis of Summit Tax Planning, whose downtown Boise office sits between a coffee roaster and a bike shop. “In my twenty years of preparing returns, I’ve never seen something impact the bottom line this fast,” she said while reviewing stacks of draft 1040s.
She described one couple whose return last year resulted in just a $400 refund; with the same financials this year, they’re looking at about $2,800—and that’s before accounting for Idaho’s state pension break.
What the Deduction Means for Idaho Retirees
Here’s how the tax break works:
Federal Deduction
- The new federal law allows a $6,000 per person deduction if you are 65 or older (or 62 if disabled).
- On top of this, there is the usual age-based standard deduction bump—for example, in 2025 married couples get an extra $1,600 per spouse.
- For a married pair eligible for both, they could potentially wipe out up to $7,600 from their taxable income.
- The caveat: the full deduction applies only if their modified adjusted gross income (MAGI) stays below $150,000 on a joint return. For each extra $1,000 above that threshold, the deduction shrinks by $200.
Idaho State Rules
- Idaho eliminated state tax on Social Security back in 1991, so retirees there already enjoy 100% exclusion of Social Security income from state tax.
- Additionally, seniors (65+, or 62+ if disabled) may subtract up to $48,516 (inflation-adjusted for 2025) of public pension or military retirement pay from their Idaho state taxable income—though this limit is reduced by the amount of Social Security benefit collected.
Hard Numbers from Idaho
The Idaho State Tax Commission estimates that about 198,000 returns in Idaho will claim this deduction in 2025. The average savings per household is approximately $5,920. That’s about $92 million less in state revenue—but according to the Idaho Department of Commerce seniors spending their savings locally (groceries, pharmacies, tire shops) gives the economy a boost via a 1.6× multiplier effect.
Summary Table
| Line Item | 2025 Amount | Age Rule | Phase-Out Details |
|---|---|---|---|
| “No Tax on Social Security” deduction | $6,000 per person | 65 (62 if disabled) | Begins to shrink if MAGI > $150K |
| Extra standard deduction | $1,600 per person | 65 | None |
| State Social Security exclusion | 100% exclusion | All ages | None |
| Public pension subtraction | Up to $48,516 | 65 (62 if disabled) | None—but reduced by Social Security amount |
| Property-tax Circuit Breaker | $250-$1,500 | 65, income ≤ $37,810 | Income cap applies |
What Retirees Should Do Before April 15, 2026
Since these changes apply to 2025 income, Idaho seniors (and those across the U.S.) will claim the benefits when they file their 2025 federal Form 1040 and Idaho Form 40 in early 2026. Here are the steps:
- Retain every 1099-SSA and 1099-R you receive in January.
- If subtracting Social Security, file Form 39R and mark box 4b.
- On Idaho Form 40, Part B line 9, subtract Social Security first, then apply the pension allowance.
- If you need extra time, request an extension (deadline still April 15).
- Download the “Senior Deduction Worksheet” (page 17 of the Form 40 instructions) and follow it carefully.
This is no gimmick. For roughly 200,000 Idaho seniors, this new deduction represents real money—enough to fix the roof, keep the camper, or treat the grandkids to a trip to the Tetons. From twin-wides in Nampa to condos in Coeur d’Alene and farms near Blackfoot, next January’s envelope may carry something more than bills—it may hold proof that in 2025, the tax-man owes them something back.
