IDAPA 35.01.01.120 — ADJUSTMENTS TO TAXABLE INCOME -- SUBTRACTIONS AVAILABLE TO ALL

TAXPAYERS (RULE 120).
Section 63-3022, Idaho Code. The following are allowable subtractions to all taxpayers in computing Idaho taxable
income.
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01.
State and Local Income Tax Refunds. State and local income tax refunds included in taxable
income may be subtracted, unless the refunds have already been subtracted pursuant to Section 63-3022(a), Idaho
Code.
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02.
Idaho Net Operating Loss. An S corporation or a partnership that incurs a loss is not entitled to
claim a net operating loss deduction. The loss is passed through to the shareholders and partners who may deduct the
loss.
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03.
Income Not Taxable by Idaho. Income exempt from taxation by Idaho includes the following:
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a.
Interest income from obligations issued by the United States Government. Gain recognized from
the sale of United States Government obligations is not exempt from Idaho tax and may not be subtracted from
taxable income.
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b.
Idaho lottery prizes exempt by Section 67-7439, Idaho Code. For prizes awarded on lottery tickets
purchased in Idaho a subtraction is allowed for each lottery prize that is less than six hundred dollars ($600). If a prize
equals or exceeds six hundred dollars ($600), no subtraction is allowed. The full amount of the prize is included in
income.
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c.
Certain income from loss recoveries. See Section 63-3022R, Idaho Code.
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04.
Special First-Year Depreciation Allowance. As provided by Section 63-3022O, Idaho Code, if a
IDAHO ADMINISTRATIVE CODE
IDAPA 35.01.01
Idaho State Tax Commission
Income Tax Administrative Rules
Section 121
Page 19
taxpayer claims the special first-year depreciation allowance on property acquired before 2008 or after 2009 pursuant
to Section 168(k), Internal Revenue Code, the adjusted basis of that property and the depreciation deduction allowed
for Idaho income tax purposes must be computed without regard to the special first-year depreciation allowance. The
adjustments required by this subsection do not apply to property acquired after 2007 and before 2010.
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a.
Depreciation. The amount of depreciation computed for Idaho income tax purposes that exceeds
the amount of depreciation computed for federal income tax purposes may be subtracted.
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b.
Gains and losses. During the recovery period, the adjusted basis of depreciable property computed
for federal income tax purposes will be less than the adjusted basis for Idaho income tax purposes as a result of
claiming the special first-year depreciation allowance. If a loss qualifies as a capital loss for federal income tax
purposes, the federal capital loss limitations and carryback and carryover provisions apply in computing the Idaho
capital loss allowed.
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i.
If a sale or exchange of property results in a gain for both federal and Idaho income tax purposes, a
subtraction is allowed for the difference between the federal and Idaho gains computed prior to any applicable Idaho
capital gains deduction.
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ii.
If a sale or exchange of property results in a gain for federal income tax purposes and an ordinary
loss for Idaho income tax purposes, the federal gain and the Idaho loss must be added together and the total may be
subtracted. For example, if a taxpayer has a federal gain of five thousand dollars ($5,000) and an Idaho loss of four
thousand dollars ($4,000), the amount subtracted would be nine thousand dollars ($9,000).
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iii.
If a sale or exchange of property results in an ordinary loss for both federal and Idaho income tax
purposes, the difference between the federal and Idaho losses may be subtracted. For example, if a taxpayer has a
federal loss of three hundred dollars ($300) and an Idaho loss of five hundred dollars ($500), the amount subtracted
would be two hundred dollars ($200).
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iv.
If a sale or exchange of property results in a capital loss for both federal and Idaho income tax
purposes, apply the capital loss limitations and subtract the difference between the federal and Idaho deductible
capital losses. For example, if a taxpayer has a federal capital loss of six thousand dollars ($6,000) and an Idaho
capital loss of eight thousand dollars ($8,000), both the federal and Idaho capital losses are limited to a deductible
capital loss of three thousand dollars ($3,000). In this case, no subtraction is required for the year of the sale. In the
next year, assume the taxpayer had a capital gain for both federal and Idaho purposes of two thousand dollars
($2,000). The capital loss carryovers added to the capital gain results in a federal deductible capital loss of one
thousand dollars ($1,000) and an Idaho deductible capital loss of three thousand dollars ($3,000). The taxpayer would
subtract the difference between the federal and Idaho deductible losses or two thousand dollars ($2,000) in computing
Idaho taxable income.
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