Real estate taxes — they’re probably the least popular subject people like to explore when considering homeownership. Unfortunately, real estate taxes affect both home buyers and sellers, and the requirements vary not only from state to state, but from city to city.
Understanding real estate taxes in Idaho can be confusing, so we’ve outlined everything you need to know in this handy tax guide. You’ll learn what taxes sellers are responsible for, how real estate taxes work, how to calculate your property taxes, and what tax breaks buyers and sellers may be eligible for.
Will You Have to Pay Taxes When You Sell Your Home in Idaho?
When selling your home, you might be wondering if you’re required to pay taxes on the money you receive from the seller. Luckily, most sellers won’t have to worry about taxes, since the federal government only requires sellers to pay taxes on home profits higher than $250k. This refers to the profit you make after paying off the mortgage. In addition, if you’re married and file your taxes jointly, this number bumps up to $500k.
This applies to any home you purchase in Idaho, so long as you’ve lived there for a minimum of two years, meet the profit requirements, and do not use this exclusion on another residence in the same amount of time.
What’s great about this tax exclusion is that you can use it every time you sell a primary residence, as long as you’ve lived there for two years and have not used this tax exclusion on another house within the last two years. In addition, while some states do charge capital gains tax on real estate, luckily Idaho is not one of them.
How Much Are Real Estate Transfer Taxes in Idaho (and Who Pays Them)?
Another tax you’ll need to be aware of is a real estate transfer tax. This tax is owed to the state, county, city (or all three), whenever a real estate property transfers ownership. Generally, this tax is charged at a percentage of the overall property sale or home value. Transfer taxes can be owed by either the buyer or the seller, depending on contractual obligations or the real estate location.
If you live in Idaho and sell or buy a home in state, you won’t have to worry about transfer taxes. That’s because Idaho is one of a handful of states that do not impose transfer taxes, easing the financial burden of buying or selling a home.
How to Calculate Property Taxes in Idaho
Property taxes are an unfortunate implication of homeownership and they can be tough to understand and estimate. Generally, property taxes are determined by the value of your home. These taxes usually go towards serving your local community, such as paying for firefighters and funding public services, like schools and libraries.
The amount owed for Idaho property taxes is determined every year on January 2st. A county assessor will determine your property’s current market value and the tax you’ll pay is based upon your county’s current tax rate.
County tax rates range throughout the state. To put this into perspective, a home in Boise, Idaho (Ada County) has a property tax rate of .801%. A homeowner with a property in Boise worth $250,000 would then pay $2,003 for their annual property taxes.
A homeowner with the same home value of $250,000 in Twin Falls (Twin Falls County) would be charged $1,935 for property taxes at a rate of .774%. Likewise, a homeowner with the same valued property in Nampa (Canyon County) would be charged $2,550 in property taxes, at a rate of 1.020%.
Property taxes in Idaho are fairly low when compared to the rest of the U.S. Even so, it’s important to find out your local property tax rates before buying a home, so you’re not surprised during tax season. A qualified real estate agent can help you figure out your new home’s tax rate.
Tax Breaks for Idaho Home Buyers & Sellers
One of the upsides to paying taxes as a homeowner is learning more about the different deductions and tax breaks you might qualify for. Both home buyers and sellers should be aware of all the possible deductions available to them.
Tax Breaks and Credits for Buyers
Buyers can save when purchasing a new home through tax credits and breaks. Here are the main tax savings to be aware of when buying a home in Idaho.
First-Time Home Buyer Tax Credits
Mortgage tax credits are often available to first-time home buyers and can be a great way to save money during your first tax season as a homeowner. These credits are referred to as Mortgage Credit Certificates (MCCs) and are issued by Idaho’s Housing and Finance Association for qualified first-time home buyers.
In Idaho the amount of your MCC is determined by the total interest paid on your loan for the year, but typically saves homeowners up to $2,000. This credit is also available for the lifetime of your loan.
To qualify for an MCC, you’ll need to meet first-time home buyer requirements in Idaho (must not have owned another home within three years), must meet Idaho income limits, must buy a home that does not exceed home price limits, and you must be the primary occupant of the home.
You can learn more about MCCs and if you’ll qualify by partnering with a local real estate agent.
Mortgage Interest Deductions
Homeowners in Idaho can save by deducting the mortgage interest paid each year on their taxes. Homeowners who owe less than $750,000 qualify and can deduct the full amount of interest paid.
You’ll have to itemize your taxes to deduct this interest and this tax deduction can only be used on your residence and one other qualifying residential home.
Private Mortgage Insurance Deductions
If you’re a first-time home buyer or another Idaho home buyer who paid less than 20% on your down payment, you likely were required to purchase mortgage insurance (PMI). One upside about this additional monthly payment is you qualify for PMI deductions.
As long as you paid PMI the previous year, you can deduct the full amount paid per year when filing your taxes. You lender or agent can provide you with more information.
Property Tax Deductions
Often, Idaho homeowners pay their property tax throughout the year. If this applies to you, you might be eligible to receive some of this money back through a property tax deduction.
To qualify, Idaho homeowners should itemize their taxes and be sure all property tax payments were made on time (throughout the year or at the time of closing). Regardless of the amount you paid, $10,000 is the maximum amount you can claim during one tax year.
Tax Breaks and Write-Offs for Sellers
When selling a home in Idaho, it’s important to be aware of the many deductions and tax breaks you might qualify for. These write-offs can help you save money throughout the home selling process.
Presale Repair and Improvement Write-Offs
During the selling process, many repairs and maintenance requests pop up. From quick repairs performed based on your realtor’s recommendation to post-inspection repairs, if these fixes were made prior to closing, you can most likely write them off.
It’s important to distinguish the difference between a repair and an improvement before writing off these charges. The IRS offers full deductions for repairs, but only partial for improvements.The IRS defines a repair as required maintenance performed to restore your home to its market value. An improvement is non-required maintenance or an upgrade done to enhance your home and improve its overall value.
Typical repairs include:
- Fixing a leaky roof
- Removing mold
- Replacing broken windows
Typical improvements include:
- Updating flooring
- Remodeling a bathroom
- Upgrading kitchen countertops
While repairs can be deducted for the full amount spent, improvements can only be partially deducted and must follow a depreciation schedule. Your real estate agent can explain the difference between the two and help you make the best decisions for your home.
Mortgage Interest and Property Taxes Deductions
Home sellers in Idaho can still deduct mortgage interest payments and property tax payments made during the year from their taxes. Sellers follow the same rules as homeowners: for mortgage interest deductions, they must owe less than $750,000 on their home and for property taxes, deductions are capped at $10,000.
Moving Cost Deductions
Current active members of the military who are selling their home in Idaho and moving for the military are able to deduct the full amount of their moving expenses from their taxes. A local agent can provide more information on this tax break.
Real estate taxes rules can be complicated and difficult to understand. If you’re buying or selling a home in Idaho, it’s important to research your tax expectations, as well as understand the tax breaks you’ll be eligible for.
Before selling your home in Idaho, maximize your tax incentives by partnering with a local Clever agent near you. Learn more here.
Before buying a home in Idaho, maximize your tax savings by teaming up with a local Clever agent near you. Learn more here.