StructuredSales.org
StructuredSales.org
Idaho sellers do not all face the same state tax. A Magic Valley dairy, a Lemhi or Custer County cow-calf outfit, a Benewah timber tract, and a Boise founder selling company stock can close in the same month and land in different Idaho computations. The difference is Idaho Code § 63-3022H, the 60% capital-gains deduction for qualifying Idaho property.
The flat rate itself is simple. For tax years beginning on or after January 1, 2025, including 2026, Idaho's individual income tax is 5.3% of Idaho taxable income. There is no preferential capital-gains bracket. What moves the bill is whether the asset is Idaho real property, qualifying livestock, qualifying timber, or something else. A structured installment sale under IRC § 453 does not change that classification. It changes when the qualifying gain, and the federal tax on it, shows up.
If you report capital-gain net income, 60% of the net gain from qualified property is a deduction in arriving at Idaho taxable income. Forty percent remains in the Idaho base and is taxed at 5.3%. On a dollar of qualifying gain, that is an effective Idaho rate of 2.12%, before credits and before any netting against other capital losses. Gains the Internal Revenue Code treats as ordinary income, including depreciation recapture, do not qualify. The deduction cannot exceed capital-gain net income from all property included in taxable income.
Qualifying Idaho real property, livestock, and timber: about 2.12% effective Idaho tax (40% of the gain × 5.3%). Stock, goodwill, and other intangibles: the full 5.3%, unless a narrow partnership look-through applies.
Qualified property has to have an Idaho situs at the time of sale, and the holding period is measured to that sale date:
The State Tax Commission is explicit that stock, bonds, and interests in a partnership, LLC, or S corporation generally do not qualify. The partnership sentence in the statute is a real-property look-through, not a goodwill exclusion. A founder who sells shares in a Boise software or construction company should not budget the 2.12% rate. A family that sells the deeded ground, and not the operating-company stock, might.
Idaho conforms to the Internal Revenue Code as of January 1, 2026, with stated exceptions that do not include the installment method. Form CG, line 3, is written for this situation: if you used federal Form 6252, you compute the Idaho deduction on the current year's taxable portion of the installment payment, and you attach the federal form. The holding period is tested on the date of sale. Collecting the note over ten years does not restart the 12-month or 24-month clock, and it does not cure a sale that was short of the clock on day one. Interest paid on the deferred price is ordinary income. It never enters the 60% deduction.
Residents owe Idaho tax on all income. Nonresidents owe it on Idaho-source income, which the Tax Commission defines to include income from property in Idaho. Selling the ranch and moving to Washington or Nevada does not pull the land gain out of Idaho. Each later installment of Idaho-source gain is still reported, and the deduction is still computed on the qualifying slice of that year's payment. Nevada adds no income tax. Washington taxes many long-term gains and leaves deeded real estate and timber out, which is the line in the Washington guide. Oregon would be a different second return if the seller became an Oregon resident; the Idaho source piece remains Idaho's. The mechanics of a carrier-funded installment, as distinct from a buyer note, are covered in what a structured installment sale is.
The asset-allocation work on an Idaho ranch is the tax return. Deeded pasture and hay ground held for years is the core of the deduction. Breeding cattle and horses need 24 months in Idaho; a calf crop sold as inventory is ordinary. A grazing permit that rides along with the base ranch can be part of the real-property gain if the instructions' conditions are met. Machinery throws § 1245 recapture in the year of sale, and that recapture is outside both the installment method and the Idaho deduction. The broader farmland sale pattern — price allocation, recapture at closing, land on the installment — is the same work, with Idaho's holding periods laid on top. Heirs who received a stepped-up basis may have less gain than the family story suggests, and the Idaho deduction applies only to gain that exists.
North Idaho timber qualifies when it was grown in Idaho, held at least 24 months, and the federal rules treat the sale as capital gain or § 1231 gain. Ordinary income under IRC § 631 does not. Goodwill and stock in a Treasure Valley company miss the deduction unless a partnership interest is documented down to qualified Idaho real property before the purchase agreement is signed. Where the alternative is a like-kind exchange, compare farmland 1031 versus an installment sale and installment sales versus 1031 exchanges.
These figures are an estimate for a married couple filing jointly. They are not a projection of anyone's return. The couple sells deeded ranchland for $2,400,000 with a $600,000 basis, so the long-term gain is $1,800,000. The land has been in Idaho more than 12 months and is assumed to qualify in full. The illustration spreads principal evenly over 10 years: $240,000 of principal a year, a 75% gross-profit percentage, and $180,000 of recognized gain a year. Interest on the unpaid balance is ignored in the tax math because it is ordinary and would be taxed on top of these numbers in the year it is received.
Other income produces $80,000 of federal taxable income before the gain, which implies about $112,200 of other adjusted gross income after the 2026 married-filing-jointly standard deduction of $32,200. Federal long-term rates for 2026 are 0% up to $98,900 of taxable income, 15% through $613,700, and 20% above that. The 3.8% net investment income tax applies to the lesser of net investment income or the amount of modified adjusted gross income over $250,000. The model ignores the additional standard deduction for age, the Idaho grocery credit, capital-loss netting, selling expenses, and the § 453A interest charge, which does not start until outstanding installment obligations exceed $5 million. This contract price is under that line.
| Tax on the $1.8 million gain | Lump sum in 2026 | 10-year installment, total |
|---|---|---|
| Federal long-term capital gain tax | $330,480 | $241,650 |
| Federal 3.8% net investment income tax | $63,164 | $16,036 |
| Idaho tax after the 60% deduction | $38,160 | $38,160 |
| Combined | $431,804 | $295,846 |
The lump-sum federal tax uses $18,900 of remaining 0% room, then $514,800 at 15%, then the rest at 20%, plus 3.8% on the portion of modified adjusted gross income over $250,000. Each installment year stays in the 15% band: $24,165 of long-term tax and about $1,604 of net investment income tax. Ten years of federal tax are $257,686. Idaho is $1,800,000 × 40% × 5.3% = $38,160 either way. The estimated difference, about $135,958, is federal. Goodwill or § 1245 recapture would sit outside the deduction, and recapture would be taxed in the year of sale. A related-party resale can accelerate gain under § 453(e). How installment gain is reported on Form 6252 is the federal half of the same closing.
Idaho's individual income tax is a flat 5.3%. There is no separate capital-gains bracket. Qualifying Idaho property can take a 60% deduction, so 40% of that gain is taxed at 5.3%, an effective rate of 2.12% before other adjustments.
Idaho real property held at least 12 months, including a grazing permit or lease transferred with the base property; tangible personal property used in a revenue-producing enterprise and held at least 12 months; cattle or horses held in Idaho for breeding, draft, dairy, or sporting purposes for at least 24 months; other breeding livestock held at least 12 months; and Idaho-grown timber held at least 24 months. Stock, goodwill, and most other intangibles do not qualify. A partnership interest can qualify only to the extent the gain is attributable to qualified Idaho real property. Ordinary recapture does not qualify.
Yes, if the property qualified. Idaho Form CG tells you to compute the deduction on the current year's taxable portion of the installment payment and to attach federal Form 6252. The property still had to meet the minimum holding period by the date of sale. Interest on the payments is ordinary income and does not get the deduction.
Gain from Idaho property is Idaho-source income. A nonresident is taxed on Idaho-source income, including installment gain from Idaho real property collected after the move. The 60% deduction can still be claimed on the qualifying portion reported that year. Nevada adds no income tax. Washington's excise tax leaves deeded real estate and timber out and taxes stock and most goodwill. Neither state erases the Idaho return.
On a flat 5.3% tax with a flat 60% deduction, the Idaho dollars on a qualifying gain are the same whether the gain is recognized in one year or ten. Spreading changes federal bracket and net-investment-income-tax results, and it changes when Idaho is paid. It does not change the 2.12% effective Idaho rate on property that qualifies.
Last reviewed: October 22, 2026.
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