When comparing tax laws, the cost of living must be taken into account. Idaho has a cheaper cost of living than Washington, according to current research. The cost of living, food, and transportation are all lower in Idaho. The greater minimum wage in Washington, though, might make up for the disparity in cost of living.
Many entrepreneurs and small business owners use LLCs as their preferred business structure. Since LLCs are taxed as pass-through businesses in Idaho, the company itself is exempt from paying taxes. Instead, the individual owners receive a pass-through of the earnings and losses, which they then record on their personal income tax returns.
Depending on your salary, Idaho’s state income tax can range from 1.125% to 6.925%. Additionally, the state’s 6% sales tax is lower than the national average. Idaho has slightly lower than average property taxes, with an effective rate of 0.76% on average.
Yes, Idaho has a self-employment tax that is identical to the federal one. Medicare and Social Security are funded in part by this tax. You must pay both the employer and employee components of this tax if you are a self-employed person in Idaho. Which state has lower taxes—Washington or Idaho—then?
Compared to Washington, Idaho has a lower overall tax rate. Idaho may have a lower cost of living than Washington, but the difference might not be enough to make up for Washington’s higher taxes. Which state is more advantageous for taxes ultimately depends on personal factors, including income, business structure, and personal preferences. To choose the best course of action, it’s crucial to speak with a tax specialist.