Montana allows for a partial exemption for Pension and Annuity income. You may qualify for the disability income exemption if you meet certain qualifications.
What are the qualifications for the retirement disability exemption?
If meet the following qualifications, you can exclude up to $5,200 of retirement disability income.
- You are under the age of 65
- retired as permanent and totally disabled; and
- you are not treating your disability income as a pension and annuity.
The exemption amount is phased out when your Montana adjusted gross income is above $15,000. You can make this manual entry by going to:
- State Section
- Subtractions from income
- Disability Exclusion Worksheet
If I am not disabled, can I still qualify for an exemption?
If you are not disabled and received pension or annuity income, you may qualify for a partial exemption if your federal Adjusted Gross Income is $42,140 or less. Early distributions do not qualify for the partial exemption. Tier II Railroad Retirement benefits and disability pensions do not qualify for this exemption. Your retirement exemption is subject to the following limitations:
- You cannot exclude more than $5,060 per taxpayer for the 2023 tax year.
- Your exclusion will be reduced by $2 for every dollar that your federal adjusted gross income exceeds $42,140, no matter the filing status.
Note: both deductions detailed within this article will be repealed starting in 2024. This means you will not be able to subtract your retirement income from your Montana return when you file for the 2024 tax year.
- State Section
- Subtractions from Income
- Pension Exemption