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Stock-based compensation has become a cornerstone of executive pay packages in Idaho, from tech startups in Boise to established corporations throughout the state. Restricted Stock Units (RSUs), stock options, and Employee Stock Purchase Plans (ESPPs) are now standard tools for attracting and retaining top talent. For executives, understanding how Idaho taxes apply to these forms of compensation is essential for effective tax planning, especially as state and federal rules continue to evolve.
Whether you’re negotiating a new grant, planning a major vesting event, or considering relocation, the tax treatment of equity compensation can have a significant impact on your net income, cash flow, and long-term wealth. In this guide, I’ll break down the key facts, strategies, and pitfalls to help you navigate Idaho’s tax landscape with confidence.
Idaho treats most stock compensation as ordinary income subject to state income tax when it’s realized—at vesting, exercise, or sale, depending on the type of award. For executives and high-impact employees, this means RSUs, stock options, and ESPPs are included in Idaho taxable income, even if you reside outside Idaho but earned the compensation while working in the state. Consult your accountant and HR.
Idaho’s flat income tax structure means that high earners receiving stock-based income will pay a tax rate of 5.3% for 2025. This differs from states like California, which have a progressive state tax system. Meaning the higher your compensation, the higher your tax bracket. There’s no preferential treatment for capital gains on short-term or long-term sales compared with ordinary income at the state level. In other words, whether your equity income comes from vesting, exercising, or selling shares, Idaho taxes it as regular wage income.
Key points for executives:
Let’s break down the main types of stock compensation and how Idaho taxes each:
Restricted Stock Units (RSUs)
Income is recognized at vesting based on the fair market value of the shares. Idaho taxes this as wage income, which will appear on your W-2. If you’re a Boise executive with RSUs vesting in 2025, expect the full value to be included in your Idaho taxable income.
Non-Qualified Stock Options (NSOs)
Taxable at exercise: the spread between the strike price and the fair market value is treated as ordinary income for Idaho purposes. This income is reported on your W-2 and is subject to state income tax.
Incentive Stock Options (ISOs)
Typically not taxed at exercise for federal purposes, but Idaho may tax gains upon sale depending on your residency and the source of income. If you exercise ISOs and later sell the shares, any gain may be subject to Idaho tax if the income was earned while working in state.
Employee Stock Purchase Plans (ESPPs)
Ordinary income for Idaho taxes is recognized when shares are sold, with any remaining gain treated as capital gain, still fully taxable by Idaho. ESPPs can be an excellent tool for building wealth, but be aware of the tax implications upon sale.
Performance Shares or Phantom Stock
Taxable as compensation at payout; Idaho treats this income like a cash bonus. If you receive a payout from performance shares or phantom stock, it’s included in your Idaho taxable income for the year.
Idaho determines income sourcing for stock-based compensation based on where the work was performed—not where the employee resides at the time of vesting or exercise. This has important implications for executives who relocate to or from Idaho mid-year or work remotely for Idaho-based companies.
Best practices: Keep meticulous records of where you performed the work that earned your stock compensation. Track vesting dates, grant dates, and your location during each period. This documentation is crucial for accurate tax reporting and avoiding double taxation if you move between states.
Effective planning can help you manage Idaho income tax exposure and maximize your after-tax wealth. Here are strategies I use with Boise executives and employees:
If you’re relocating, consider timing the exercise or sale of stock options to manage Idaho tax exposure. For example, exercising options before moving out of Idaho may result in Idaho-sourced income, while waiting until after relocation could shift the tax burden.
Use qualified retirement accounts (401(k), IRA, HSA) to offset large income years from equity compensation. Charitable giving strategies, such as donating appreciated shares to a donor-advised fund, can also help reduce taxable income in high-vesting years.
If you work in other jurisdictions during the vesting or grant period, consider the multi-state tax implications. Coordinate with your CPA to file part-year returns and avoid double taxation.
Because equity compensation often results in “lumpy” income, quarterly tax projections and proactive withholding adjustments are recommended to avoid penalties and unexpected tax liabilities.
Idaho generally conforms to federal definitions of income but does not mirror all federal preferences, such as capital gains rates and Alternative Minimum Tax (AMT) adjustments.
Accurate recordkeeping is important for Idaho stock compensation reporting. Here’s what to watch for:
If you earned the options while working in Idaho, the income may still be Idaho-sourced and taxable, even if you move before the options vest. Track your work history and consult your CPA.
In most cases, RSUs that vest after retirement are forfeited. However, some plans do allow vesting even once retired. If RSUs were earned while working in Idaho, they may be subject to Idaho tax at vesting, even if you’re retired and living elsewhere.
Idaho does not offer special deductions or credits for stock compensation income. All equity income is taxed as ordinary income.
Capital gains from stock sales are taxed as ordinary income at the Idaho state level—no preferential rates.
Your equity compensation may be Idaho-sourced and taxable at Idaho state tax rates if the work was performed for an Idaho employer. Keep detailed records and consult your tax advisor.
At OnePoint BFG, we specialize in helping Idaho professionals and executives manage complex stock-based income under both state and federal tax law. Our personalized tax planning and equity analysis align your compensation decisions with long-term financial goals.
We’ll help you:
If you have stock compensation vesting or are considering a major equity event, now is the time to review your plan and Idaho tax exposure. Schedule a complimentary consultation to ensure your strategy is optimized before year-end filings.
Sources:
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