Idaho Adopts Nearly All Federal Tax Changes from 'Big, Beautiful Bill'

New law reduces state revenue by $155 million this fiscal year, $175 million in 2027

Published on Feb. 12, 2026

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Idaho Gov. Brad Little has signed into law a bill that conforms the state's taxes to nearly all the changes included in the federal 'One Big Beautiful Bill Act' passed by Congress last year. The new law is expected to reduce Idaho's state revenue by $155 million in the current fiscal year and $175 million in fiscal year 2027, though it may also lead to delays in the state tax commission issuing refunds and payments.

Why it matters

The tax conformity bill is a significant piece of legislation that will impact Idaho taxpayers, both individuals and businesses, by aligning the state's tax code with the federal changes. While the tax cuts are intended to allow Idahoans to keep more of their money, the revenue loss could put pressure on the state's budget and potentially lead to delays in tax processing and refunds.

The details

House Bill 559 adopts nearly all the same tax cuts included in the federal 'One Big Beautiful Bill Act,' such as no taxes on workers' tips, no taxes on overtime for some employees, an enhanced deduction for seniors, and full deduction on eligible research and experimentation expenses starting in 2025. The bill is retroactive to January 1, 2025, meaning the write-offs and other incentives apply to returns currently being filed. However, the tax commission was not provided any additional funding to immediately redesign forms and update software to adjust to the changes.

  • House Bill 559 was signed into law by Idaho Gov. Brad Little on February 12, 2026.
  • The tax changes are retroactive to January 1, 2025.
  • The bill is expected to reduce Idaho's state revenue by $155 million in the current fiscal year, which ends June 30, 2026, and $175 million in fiscal year 2027.

The players

Brad Little

The governor of Idaho who signed House Bill 559 into law.

Jeff Ehlers

The Republican state representative who sponsored House Bill 559.

Scott Grow

The Republican state senator who sponsored House Bill 559.

Jim Guthrie

The only Republican state senator to vote against House Bill 559, opposing the partial deduction for research and experimentation expenses.

Idaho State Tax Commission

The state agency responsible for administering Idaho's tax laws, which may face delays in issuing refunds and payments due to budget cuts.

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What’s next

The across-the-board budget cuts for the current fiscal year that were approved by the Legislature's budget committee will go before the Idaho House and Senate for a vote.

The takeaway

The tax conformity bill represents a significant shift in Idaho's tax policy, aligning the state more closely with federal changes. While the tax cuts are intended to benefit taxpayers, the revenue loss and potential processing delays raise concerns about the broader budgetary and administrative impacts on the state.