Montana Department of Revenue

Montana Tax Tip: Property Tax Relief for Disabled Veterans

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Montana Tax Tip: Property Tax Relief for Disabled Veterans

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Montana veterans have through April 15 to apply for the Montana Disabled Veteran Assistance Program, which can provide relief on property taxes.

Veterans with 100 percent service-related disabilities and their unmarried surviving spouses may be eligible.

Single veterans may qualify if their federal adjusted gross income is less than $52,507. That limit is $60,585 for veterans who are married or head of household, and $45,775 for unmarried surviving spouses.

Depending on income, the program can reduce general property taxes by 50 to 100 percent on a primary residence.

As long as the applicant owns and lives in his or her home, that application will remain active and the department will send a letter each year with the homeowner’s current status in the program.

See the Montana Disabled Veteran Property Tax Assistance Program (MDV) for more information.

Download the MDV Application in My Revenue

Changes to the College Contribution Credit

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The college contribution credit a taxpayer may claim on the Montana College Contribution Credit (Form CC) is calculated based on the amount of charitable contribution made by the taxpayer to the foundation or general endowment fund of a college or university located in Montana.

Under the Tax Cut and Jobs Act, charitable deductions are not allowed for payments made to institutions of higher education when the taxpayer receives in return the right to purchase tickets for athletic events at the institution either directly or indirectly.

Other deductible charitable contributions made to a college located in Montana still qualify for the credit. However, if you take the credit for Montana tax purposes, you must reduce your charitable contribution by the corresponding amount.

Miscellaneous Itemized Deductions for Tax Year 2018

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The federal Tax Cuts and Jobs Act suspended all miscellaneous deductions referenced under IRC 67, for the tax years 2018 through 2025.

Miscellaneous itemized deductions are those deductions that would have been subject to the two percent of adjusted gross income limitation.  These deductions are also suspended for Montana income tax purposes.

The suspended deductions include, but are not limited to:

  • Unreimbursed employee expenses
  • Investment fees
  • Tax preparation fees
  • Most casualty and theft loss not related to income producing property

For tax year 2018, line 18 of the Montana Itemized Deductions Schedule refers to miscellaneous deductions that are not subject to the two percent floor and reportable on federal Form 1040, Schedule A, line 16, such as:

  • Net Qualified Disaster Losses, or
  • Deductions for the repayment of under a claim of right amounts such as Social Security benefits.

Casualty and theft losses of income-producing property and gambling losses, which are also deductible on federal Form 1040, Schedule A, line 16, are deductible on lines 15 and 17 respectively on the Montana Itemized Deductions Schedule.

Montana Individual Income Tax Return Form 2 Available in My Revenue

Military Spouse Filing Updates

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On December 31, 2018, the Servicemembers Civil Relief Act was amended so that a taxpayer moving to a state to be with their spouse who is a military servicemember may choose to use the tax residence of the military spouse.

Previously, when a taxpayer was not a resident of the state where his or her spouse was a resident for tax purposes, the Act did not provide protection against gaining tax residency in the state where the taxpayer moved to in order to be with their spouse.

A servicemember’s spouse can now elect to be protected by the Act by choosing the tax residency of the servicemember when filing their state income tax return.

The Act also exempts spouses who are not residents of Montana for tax purposes from paying income tax on the wages they earn in the state. The protection does not apply to a spouse that is already a resident of Montana or who elects to be a resident of Montana.

Clarifications Regarding the Deductibility of Federal Income Taxes

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As in previous years, you can deduct up to $5,000 of federal income taxes paid on your Itemized Deductions Schedule, line 4. At the request of some tax practitioners, the instructions on Form 2, page 21, now include a list of the deductible federal income taxes. For example, the Self-Employment Tax is not on the list and is not deductible.

However, when you pay your federal taxes as you go, you often pay income taxes and other taxes together. You will not know how much federal income taxes you have paid until your federal Form 1040 is completed. As a result, if your federal tax payments were greater than your federal income taxes calculated on your federal return, the excess will include other taxes and/or an overpayment, neither of which can provide a tax benefit for Montana.

Example

In the following example, the amount of federal income tax paid in 2018 that you can use to reduce Montana Taxable income is $4,000 ($11,000 – $6,000 – $1,000 = $4,000)

Federal wage withholding paid in 2018:
$5,000
Federal estimated tax paid in 2018:
$6,000
Total paid in 2018:
$11,000
Deductible income tax reported on your 2018 Form 1040:
$4,000
Other taxes and liabilities on your 2018 Form 1040:
$6,000
Total liabilities for 2018:
$10, 000
Overpayment:
$1,000

If you determine that the overpayment ($1,000 in the example) was a payment based on an estimate of income taxes alone, you can still deduct this amount as an itemized deduction, provided the limit of $5,000 has not been reached. However, this amount would have to be recovered on the 2019 tax return, because you cannot receive a tax benefit from that payment for Montana income tax purposes.

Form NOL for 2018 is Now Available

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The Montana Net Operating Loss (Form NOL) for 2018 is now available. It includes guidance on a new class of net operating losses (NOL) and how to include the loss limitation in section 461(l) of the Internal Revenue Code (IRC) in your NOL deduction so you can take it in future years.

Because of changes made to section 172 of the IRC in the Tax Cut and Jobs Act, Montana NOL deduction from losses incurred in 2018 must now follow new principles. This is because Montana statute has a rolling conformity with this federal section. For simplification, the Montana NOL instructions call the net operating losses following the new principles Class B NOLs.

Class A NOL
Class A NOLs are NOL deductions from losses incurred in tax years before 2018.
These keep following the principles that applied in tax years before 2018.
Class B NOL
Class B NOL, including a 2018 NOL, cannot be carried back, except for farming losses, which can only be carried back two years.
Class B NOL deductions cannot be more than 80 percent of your taxable income reported before such NOL deduction.
As a result, when a Class B NOL deduction is taken, there will always be Montana taxable income. However, there is no longer any limit to the number of years you can carry forward such losses after taking an NOL deduction.

Form NOL also includes guidance on the new limitation in Subsection 461(l) of the IRC. If you have more than $250,000 of business losses, or $500,000 in the case of a joint return, the excess cannot be taken in 2018 and must be included in the Class B NOL deduction to carry forward to 2019.

You can find instructions about how to calculate excess losses for Montana tax purposes in the Montana Individual Income Tax (Form 2) Instructions.