Tax simplification changes now in effect for Montana

Taxpayers preparing their 2024 Montana tax return may be noticing the effect of Senate Bill 399 from the 2021 Legislature.

According to a press release from the Montana Department of Revenue, the bill aligns the Montana tax system more closely to the federal system and the calculation of Montana taxable income starts with federal taxable income.

Some subtractions and deductions, such as the subtraction for certain tips and the Montana deductions for 100% of medical insurance premiums, were eliminated. However, some new deductions were added, including a $5,500 subtraction for taxpayers 65 and older.

For more detail about these changes, visit the Simplification Hub on the department's website.

To accommodate the changes, the Department of Revenue provided all employers and payroll providers with updated wage withholding tables.

These tables are used to determine how much your employer should withhold from your paycheck and then send to the department for your state income tax liability.

When the updated tables were provided, the department also asked employers to have their employees update the information on their MW-4 (Montana Employee's Withholding Allowance and Exemption Certificate).

The changes in calculating Montana taxable income may mean that your tax liability (tax amount based on your taxable income) is different from last year even if your total income was relatively the same.

This combined with the new withholding may also affect your bottom-line refund or tax due.

The department encourages individuals to review their wage withholding.