Frequently Asked Questions

Montana no longer has a specific standard deduction. The calculation of Montana taxable income will begin with federal taxable income (less the federal qualified business income deduction). This means that if you take the federal standard deduction, it will be used to figure your Montana taxable income. If you itemize deductions on your federal return, this amount (without regard to the state income tax deduction) will be used to calculate your Montana taxable income.

Montana no longer has dependent or personal exemptions.

Yes. The deduction for unemployment compensation from federal adjusted gross income has been repealed.

Yes. Tips for taxpayers that work in the service industry are now taxable under the new law.

Under the new law, Montana no longer has specific itemized deductions. These previously included:

100% of medical insurance premiums

100% of long-term care premiums

Up to $5,000 of federal income tax ($10,000 for joint filers)

Political contributions (up $100 per taxpayer)

Child and dependent care expenses claimed on Montana Form 2441-M

If you itemized your federal deductions those amounts will be included in the determination of your Montana taxable income. This amount will be adjusted to remove any state income tax deduction to the extent that it does not reduce the deduction below the allowable federal standard deduction for your filing status.

No. You must use the same filing status that you use on the federal tax return.

You must use the filing status you used on your federal tax return. If you are a resident filing jointly with a nonresident or part-year resident, you will complete the Schedule II (Tax on Montana Source Income) to determine the tax on the income you receive as a resident of Montana and any Montana source income your spouse receives.

Unemployment compensation

Tip income for certain service industry workers

Partial interest income deduction for taxpayers aged 65 or older

Partial pension, annuity, and IRA deduction

Health insurance premiums paid by an employer for an employee

Contributions to a Montana first-time homebuyer savings account

Deposits in a Montana farm and ranch risk management account

Dependent child’s income included in the taxpayer’s federal adjusted gross income

Student loan repayments for health care professionals and qualified educators

Partial retirement disability deduction for taxpayers under age 65

Workers’ compensation benefits

State income tax refunds

Interest and mutual funds from federal bonds, notes, and obligations

Recoveries of amounts deducted in earlier years included in federal taxable income that did not reduce Montana income tax

Exempt tribal income

Military salary of an active duty servicemember

Montana Medical Savings Account deposits and earnings (up to $4,500 per taxpayer in 2024)

529 plan deposits

ABLE account deposits

Business-related expenses for purchasing recycled material

Business expenses not included in federal taxable income due to an existing federal credit taken

Certain expenses for cannabis businesses

Tier I and II Railroad Retirement Benefits

Yes. There are two new subtractions.

There is a standard subtraction for taxpayers 65 and older of $5,500. If filing jointly and both spouses are 65 and older, the subtraction is $11,000. This amount will be adjusted annually for inflation beginning with tax year 2025.

Certain resident military retirees that receive income from working a job, owning a business, or operating a farm, as well as residents receiving military survivor benefits may subtract a portion of their benefits from taxable income. Learn more about the Montana Working Military Retirement and Survivor Benefit Exemption .

Because the base for determining Montana taxable income starts with federal taxable income, those items of income that aren’t taxable for federal purposes, such as certain federal deductions for forgiveness of student loan debt, are not taxable to Montana to the extent that they are not included in federal taxable income. However, taxpayers must add back certain items of income that Montana taxes but are not taxed by the federal government. These items include:

Interest and mutual fund dividends from state, county, or municipal bonds from other states

Other recoveries of amounts deducted in earlier years that reduced Montana taxable income

Taxable distributions from a Montana Medical Savings Account or a Montana first-time homebuyer savings account

Deductions for state income tax paid that are included in federal taxable income

Expenses used to claim a Montana income tax credit

Farm and ranch risk management account distributions

Title plant amortization or depreciation

Taxes paid by an S corporation

If a taxpayer’s deduction is limited to the SALT cap, the adjusted itemized deduction amount on Form 2, line 2 is reduced after considering all state and local taxes, other than state income tax. View more information about reporting the deduction and revised Worksheet .