I have a client, who moved from AK to ID a few years ago. Had an AK Retirement. Drew out a substantial amt of $ to buy home (not a first time home buyer) in ID. She had plenty of Fed W/H, but nothing for ID. I can't find a way around that ID income tax & she's SO upset. $ wasn't earned or banked in ID, just drawn out & spent there. Am I missing anything? She owes like $9000! to ID if she's fully taxed by the state. I can't get ahold of a person who can talk to me at the state tax office.
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Retirement distributions are taxed where the taxpayer resides.
Idaho taxes on retirement income
Idaho taxes most types of retirement income and has a flat tax rate. However, there are no estate or inheritance taxes in Idaho.
Income Tax on Taxable Income: 5.8% flat tax rate- Social Security: Not taxable
- Pensions: Partially taxable (Some military and government pensions might qualify for an exemption)
- 401(k) and IRA Distributions: Taxable
Congress legislated a Federal supersedure, which applies to amounts received after December 31, 1995.
4 U.S.C. section 114
https://uscode.house.gov/view.xhtml?req=(title:4%20section:114%20edition
relim)%20OR%20(granuleid:USC-prelim-title4-section114)&f=treesort&edition=prelim&num=0&jumpTo =true.
Last edited by Lion; 03-19-2026, 12:30 AM. -
Sorry, that link doesn't copy. The emoji is actually edition followed by a colon followed by prelim with no spaces.Comment
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The link works properly. Just copy (stopping at ...ition) / paste into browser.
While ID is far away from me, I assume it taxes a RESIDENT on all income with whatever exclusions ID might have. The absence of any ID withholding by the AK folks is not surprising. I have clients who worked in / retired from State of NC but now live in different states. Their forms 1099-R show proper federal withholding, but NO withholding for their resident state. They cover the shortfall with estimated tax payments to their resident state.Comment
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If your client has not done so yet, she should fill out, sign, and send a new Form ID W-4 to her retirement plan administrator, hopefully before taking any 2026 distributions.
Idaho does not have a specific, separate form labeled "W-4P" for state-level withholding on pensions or annuities. Instead, Idaho uses Form ID W-4 (Employee's Withholding Allowance Certificate) for both wage earners and individuals receiving pensions, annuities, or other deferred compensation to determine state income tax withholding.
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So you think ID could somehow set up withholding for retirement income originating in AK ? ? I would have serious doubt as to the availability of that option.
(With reference to my comments above, person now lives in VA and receives State of NC retirement income. The ONLY state income taxes that NC will withhold are NC, so client has ZERO state withholding on the Form 1099R and must fall back on paying VA estimated taxes to cover the pension income.)Comment
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I think the plan administrator, perhaps a large brokerage or financial firm, could somehow set up withholding for retirement income withdrawn by an ID resident based on the signed Form the taxpayer provides to the firm. Otherwise, the taxpayer can make ID estimated tax payments. The OP can take this opportunity to educate his client on how each type of income is taxed by the IRS and ID.Comment
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Who administers the Ak state retirement plan? My daughter contributes to CT via TIAA-CREF. Hubby's retired teacher's plan is via Fidelity. At least three of my clients in different states have public plans with 1099-Rs from State Street.Often withholding is possible for the public retiree who moved to a new state. Otherwise, OP can help his client set up ES.Comment
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All states tax full year residents on world wide income. You don't say if she is a full year resident or not. You also say she was not a first time home buyer. The IRS considers anyone who has not bought a home in two years a first time home buyerComment
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