Listed below is income that can be subtracted on your Montana return:
Interest On U.S. Obligations (Line 2)
You can subtract interest received from U.S. Government Obligations and mutual funds attributable to that interest from your federal AGI as long as it is included in your federal AGI on Form 2. Amounts listed in the Federal Section under Interest or Dividends > Amount of Interest in US Savings Bonds subtracted from state return are automatically pulled to this line.
Exempt Unemployment Compensation (line 7)
Unemployment benefits from Montana or another state are not taxable to Montana. Automatically pulled from Federal Section.
Exempt Workers Compensation Benefits (Line 10)
If you received Workers Compensation benefits, they are not taxed by Montana under the worker’s compensation laws. You may enter the amount of taxable benefits here that you listed on your federal return.
Exempt Tribal Income (Line 8)
If you are an enrolled member of a tribe who lives and works on the reservation governed by your tribe, you may subtract all reservation source wages and income you earned from your federal adjusted gross income.
Military Income: (Line 13)
- Exempt Military Salary of Residents on Active Duty: If you are a Montana resident and received military pay while an active duty serviceman and it is included in your federal AGI, you may subtract your basic, special and incentive pay from your Federal AGI. If you received combat pay that is not listed on your W-2, do not list that amount as it is not included in your Federal AGI.
- Exempt Income of Nonresident Military Servicepersons: If you are living in Montana solely to comply with your military orders, but a nonresident of Montana, your military income is not considered Montana source income and is not taxed by Montana.
Pension Exemption (Line 35)
If you have any taxable retirement income listed on your Montana return, you may be entitle to a partial exemption of this income. Early distributions of retirement income, regardless of payment for penalty, do not qualify for the exemption.
- The exclusion cannot exceed $4,370 per taxpayer
- The exclusion is reduced by $2 for every dollar the FAGI exceeds $36,420
- Married individuals may choose to file married filing separate to claim the exclusion for both taxpayers
Disability Exclusion (Line 32) A partial retirement disability income exemption up to $5,200 can be claimed if you are:
- Under age 65, and
- Retired as permanent and totally disabled, and
- Not treating your disability income as a pension or annuity
- Your Montana Adjusted Gross Income is below $15,000
Exemption For Certain Tips And Gratuities (Line 9)
Montana does not tax tips and gratuities you received while working in the food, beverage or lodging industry. Tips received while working in other services are taxable.
Exemption For Certain Income Of Child Taxed To Parent (Line 5) If your Federal Adjusted Gross Income included unearned income from your dependent child from form 8814, you may be able to exclude that unearned income on the Montana return
Medical Savings Account Deduction Report the subtraction calculated on MSA Schedule, Line 4 (subtractions).
First Time Home Buyers Account (Line 16) You may be able to deduct up to $3,000 of contributions plus interest annually.
Family Education Savings Account (Line 17) You can subtract the lesser of $3,000 or the contributions made during the tax year
Farm Risk Management Account (Line 29) You can deduct deposits made to a Farm and Ranch Risk Management Account
Passive Loss Carryover Exclusion (Line 20)
If you are a filing as Married Filing Separate Montana returns, but filed joint federal returns, you are now allowed the same combined passive loss amount as if you were filing jointly.
Montana Net Operating Loss Carry Forward (line 22)
Occasionally your federal NOL will differ from your Montana NOL. In this case, you may enter that amount under this subtraction.
Exempt Montana Achieving A Better Life Experience Act (ABLE) Account Deposits (Line 18) You can subtract contributions up to $3,000 made to one or more qualifying ABLE accounts during the tax year
Local Income Tax Refunds included in AGI (Line 1)
If you are required to include your state income tax refund in your federal adjusted gross income on Form 2, line 10, you can exclude that amount on this line. Montana income tax refunds and income tax refunds received from another state are not taxable to Montana.
Gain on Eligible Sale of Mobile Home Park (Line 31)
If you are the owner of a mobile home park, and sold the park to a tenants association, Mobile home park residents association or a 501(c)(3), you may be able to subtract a portion of the gain you recognized. Complete form MNPE and enter the exclusion here.
Donation of Mineral Exploration Information (Line 30)
If you received a K-1 showing a deduction, or you have expenses for the donation of mineral exploration to the Montana Tech Foundation yourself, you can subtract the amount here (within limits).
Social Security Benefits that are Tier I Railroad Retirement Benefits (Line 34)
Subtraction for Federal Taxable Tier II Railroad Retirement Benefits (Line 33) Subtract the taxable Tier II Railroad Retirement Benefits included on Form 2, Line 4b.
Montana Total Subtractions from Montana Schedule K-1 (Line 32)
If you received Montana Schedules K-1 from a pass-through entity, report the total amount of everywhere subtractions (Column I). Do not report these subtractions separately on the Subtractions Schedule.
You can enter these subtractions by following the steps below:
- State Section
- Subtractions from Income
For a list of other subtractions, please click here.