Under the American Rescue Plan Act of 2021, taxpayers who received unemployment compensation in 2020 and have a Federal Modified Adjustment Gross Income of $150,000 or less can exclude up to $10,200 of unemployment compensation from gross income. On March 12, 2021, the IRS provided guidance on how to report the exclusion of unemployment compensation on the Form 1040. For more information, please visit the IRS website.
Unemployment compensation is never taxable in Montana. As a result:
- Taxpayers who have filed their Form 2 as of March 12, 2021 should not amend their Montana returns to report this new federal exclusion of unemployment compensation if it was already excluded on Montana Form 2.
- Taxpayers filing after March 12, 2021, must follow the revised instructions for the lines below to exclude all unemployment compensation from Montana income tax.
Instructions for Montana taxpayers filing after March 12, 2021:
- Schedule 1, line 8 – Other Income
- Enter the amount from Form 1040, Schedule 1, line 8, including the federal exclusion of unemployment compensation.
- Additions Schedule, line 14 – Other Additions.
- In addition to other Montana additions reported on this line, enter the total amount of the federal exclusion of your unemployment compensation reported on Schedule 1, line 8. Enter “UCE” in the specification box.
- Subtractions Schedule, line 7 – Unemployment Compensation
- Enter the unemployment compensation from Schedule 1, line 7. Do not subtract the federal exclusion of unemployment compensation from this line.
Questions? Contact us at (406) 444-6900 or DORHelp@mt.gov.