If you’ve got employees in Idaho or plan to there are a few 2025 payroll changes you need to know to stay compliant and avoid under-withholding.
Idaho’s Income Tax Rate Drops to 5.3%
As of January 1, 2025, Idaho’s flat personal income tax rate was reduced from 5.695% to 5.3%. This change impacts:
- Employee withholding
- Net pay calculations
- Employer budgeting for labor costs
Action Step: Confirm your payroll software or provider has applied Idaho’s 2025 withholding rate updates.
Updated Withholding Tables
The Idaho State Tax Commission has released updated 2025 withholding tables reflecting the new tax rate. Employers must use these tables for all wages paid on or after January 1, 2025.
Action Step: Review default employee profiles and any manual withholding settings to ensure they align with the new tables.
Payroll Tax Registration Reminders
All Idaho employers must register for:
- Income Tax Withholding
- State Unemployment Insurance (SUI)
Registration is completed through Idaho’s Business Registration (IBR-1) portal.
New business? Complete registration before hiring employees or issuing wages.
Wage & Payroll Compliance Tips
- Final paychecks must be issued by the earlier of the next regularly scheduled payday or within 10 days after separation (Idaho Code § 45-606).
- Maintain wage and payroll records for at least 3 years.
- Idaho’s state minimum wage is $7.25/hour (matching the federal rate). No localities currently have a higher minimum wage.
Final Thought
Even small tax changes can create costly errors if payroll isn’t updated. Idaho’s 2025 adjustments are a reminder to audit your setup now and ensure you’re fully compliant before your first payroll of the year.