Updated October 7, 2026. Quick answer: Not automatically. The State Tax Commission says “The entity paying the nonwage income might not withhold Idaho tax.” If you want it withheld, you ask the payer with Form ID W-4.
Drawing a pension? Whether the state withholds tax from it, from its own documents: Idaho tax withholding on pension payments.
Idaho withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | Not stated as a rule; the Tax Commission says the payer might not withhold Idaho tax |
| Rate or amount | No fixed rate: Form ID W-4 status, allowances and any extra amount drive it; the Idaho retirement system’s own form also offers a flat amount, a fixed percentage or the Idaho tax tables |
| How to start or stop it | Form ID W-4 or the payer’s own substitute; Idaho retirement system benefits use that system’s form RS322 |
| Direct rollover | Not stated in the documents read |
| Changed for 2026? | No change stated; the Retirement System form RS322 read is the 08/2026 revision, and the Tax Commission update page read shows a last-updated date of April 17, 2024 |
What the Idaho documents say
The Tax Commission’s Individual Income Tax Update on the Form ID W-4 says “The entity paying the nonwage income might not withhold Idaho tax.” A payee who wants Idaho tax withheld tells the payer: the update says to “Use Form ID W-4” (or the payer’s substitute) and to give your marital status and “Your number of Idaho allowances”.
Benefits paid by the Public Employee Retirement System of Idaho use that system’s State of Idaho Tax Withholding form, RS322. Among its choices are “Do not withhold Idaho tax.” and “Calculate my monthly Idaho tax withholding using Idaho tax tables”. That form is the retirement system’s, not a Tax Commission form for every payer.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. Idaho does not set a percentage for it, and the Tax Commission says the payer “might not withhold Idaho tax”, so the Idaho amount withheld may be $0. If the payer does withhold, you give it a Form ID W-4 (or its substitute), and the amount follows the status, allowances and extra amount you enter.
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. The Idaho documents read do not say how a direct rollover is treated for state withholding, so confirm it with the payer before choosing.
What a mover should know
This page is about Idaho as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it.
What the documents do not say
- The documents read cite no Idaho statute, do not address a direct rollover, and give no rate. RS322 applies to benefits from the Idaho retirement system only.
Common mistakes
- Assuming Form RS322 works for a 401(k) held elsewhere; it is the retirement system’s own form.
- Treating no Idaho withholding as no Idaho tax; the withdrawal is still reported on the return.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: how Idaho taxes 401(k) and IRA withdrawals, Idaho retirement taxes, retirement withholding calculator, and retirement taxes by state.
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Answer againSources
- Individual Income Tax Update W-4: https://tax.idaho.gov/?p=887
- State of Idaho Tax Withholding (RS322): https://www.persi.idaho.gov/docs/forms/RS322.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.