![]() ![]() ![]() Social Security income, unemployment compensation, state income tax refunds, interest from federal bonds or notes, some pension income and active duty military income are among the types of income that can be subtracted from federal AGI when calculating taxable income in Montana. That number may include some types of income that are not taxable in Montana and need to be subtracted. To calculate income taxes, Montana taxpayers should begin with their federal adjusted gross income (AGI). As shown in the table below, rates range from 1% to 6.75%. The Montana state income tax is progressively structured, with higher rates for higher income earners. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. To offset income taxes, however, Montana offers a number of tax credits, including a credit for capital gains.Ī financial advisor can help you understand how taxes fit into your overall financial goals. That bottom rate is relatively low on average, but the top rate is fairly high. The state does have a personal income tax, though, with rates ranging from 1% to 6.75%. There are no sales taxes in Big Sky Country and property taxes are below the national average, with an average effective rate of just 0.74%. Montana is a relatively taxpayer-friendly state. Gas tax: 33 cents per gallon of regular gasoline, 29.75 cents per gallon of diesel.Property tax: 0.74% average effective rate.Taxpayers will use the federal filing status to determine their tax rate, much like how tax is calculated federally. The brackets will decrease from seven to two and the new rates will be 4.7% and 6.5%. Lastly, Montana taxpayers will see a reduction in the number of tax brackets and a decrease in the tax rate. ![]() They are eligible for the 30% net-long term capital gain subtraction. Student loan repayments for health care professionals and qualified educatorsĮstates and trusts are subject to the new rates they must also add back any Qualified Business Income Deduction to Montana taxable income.Health insurance premiums taxed to an employee.Tips for certain service industry workers.Farm and Ranch Risk Management Account contributions.Montana First-time Homebuyer Account contributions made after Janu(contributions and earnings from contributions made before January 1, 2024, can still be subtracted).Montana Medical Savings Account contributions (earnings from contributions made before January 1, 2024, can still be subtracted).In addition to the repeal of the interest exemption and partial pension, annuity, and IRA income exemption, several other subtractions will be repealed, including: As a result of these changes, the interest exemption and partial pension, annuity, and IRA income exemption for taxpayers over the age of 65 will be repealed, as well as the capital gains tax credit. Second, thirty percent of a taxpayer’s Montana source net-long term capital gain may be subtracted from Montana taxable income. First, taxpayers over the age of 65 may subtract $5,500 from Montana taxable income. While taxpayers will use the federal taxable income to calculate Montana taxable income, any Qualified Business Income Deduction claimed on the federal return must be added back to Montana taxable income. This will enable taxpayers to consider the federal adjustments and the federal standard or itemized deductions they used when calculating their federal taxable income. Beginning in Tax Year 2024, Montana taxable income will be calculated starting with federal taxable income. Senate Bill 399 will align the Montana tax system more closely to the federal tax system. This is a high-level summary of what taxpayers and preparers can expect beginning in Tax Year 2024 for individual income tax filers. However, most changes take place in tax year 2024. Some changes go into effect in Tax Year 2022, which we detailed in an earlier Tax News You Can Use article. Senate Bill 399, passed during the 67 th Montana Legislative Session, made several changes to Montana’s income tax system. Senate Bill 399: Simplification of Montana Income Taxation This article is a part of our 2021 Legislative Roundup series. To help you sort out the changes, we have created a series explaining the new laws called the 2021 Legislative Roundup. The 67 th Montana Legislature made several changes to Montana’s tax laws.
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