The state of Idaho has something called the Idaho property tax exemption. This exemption has to do with property taxes and how much you pay each year. In a nutshell, if you own your home and it is your primary residence, you can participate in the homeowners exemption program.  If you are not using the property as your primary residence, for example, as a rental unit, you will pay a more significant property tax. Here is how it works.

STEP 1: County Assessor Values Your Home

The law in Idaho states that each year the assessor in each county must determine the current market value of homes as if they were sold on January first. Essentially, they have to estimate what the average buyer would pay for your house and they have to do it every year. There are many factors that go into how they come up with these numbers, but some of them include recent sale prices, quality of the home, location, and age. This process basically puts all property owners on a level playing field, with some exceptions, for calculating their portion of property taxes, Once this is done, these numbers are handed over to the local tax districts where property taxes are calculated.

For the sake of simplicity, lets just say that your property is valued at $100,000 and your lot is valued at $15,000 by the county assessor. Now we have to determine how much it is going to cost to run the local tax districts so they can use this property valuation. So the next step is to determine the budgets for all of the tax districts (entities that get your tax dollars to operate, ie, fire department and school district) that your property is located in.

STEP 2: The Local Tax District Budgets

Once the county assessor determines the value of your home, the next step is for the taxing districts to decided what your share of their budget is for the year. To do this, each tax district comes up with a budget. One key point, that some people forget, is that there are usually multiple tax districts for your home. They can include schools, the city, fire districts and so on. Once the budgets are determined, the local tax districts divide their budget amounts by the total assessed value of all the properties in the district to determine the tax rate for their district. Here is an example for just the city tax district:

  • Value of All Properties In Tax District: $2,546,531,100
  • Part of city budget funded by property tax: $15,624,387
  • City Tax Rate: $15,624,387 / $2,546,531,100 =  .00613

The same calculation for the city tax district is also performed for the school tax district, the fire tax district, and so on. When all the districts have been calculated, all the tax rates are added up to come up with the property tax rate for your home. For discussion sake, lets assume that all of the tax district rates add up to .0195 for your property. Now lets apply the tax.

STEP 3: Idaho property tax exemption Calculation

In step one the county assessor determined that you home has a taxable value of $100,000 and your lot has a value of $15,000. Therefore, your taxable value is $115,000. Now here is where the homeowner exemption comes into play. If you qualify for the exemption, you divide the assessed value of the home by a whopping fifty percent. $115,000 divided by 50% is $57,500. This means that instead of paying property taxes on $115,000, you will only pay taxes on $57,500. Based on these numbers, we can now apply the tax rate.

  • Property Assessed Value: $115,000
  • Idaho Property Tax Exemption Amount: $57,500
  • Taxable Value: $57,500
  • Tax Rate: .0195
  • Property Tax This Year: $57,500 x .0195 = $1,121.25

There are clear tax advantages to living in your home as the primary residence. If this property did not qualify for the Idaho homeowners exemption, their property taxes would be closer to $2,242.50. That is a huge difference when you consider that the median household income in Madison County in 2013 was just a bit over $30,000 a year. That means you would save 1/30th of your income by taking advantage of the Idaho homeowner tax exemption.

This article is for informational purposes only. We’re not trying to give you advice on your finances.  We highly recommend that you check with a qualified financial adviser or tax consultant to discover tax benefits that you qualify for.