Montana Individual Income Tax Forms And Instructions

2006 Montana Individual Income Tax Instructions

For the purpose of this exclusion, when you determine the

Worksheet VIII, found on page 53 of the instruction

amount of your interest income, you should consider

booklet.

distributions commonly called dividends on deposits or

After you have completed your social security worksheet

share accounts as interest. Under no circumstances can

and you find that your social security benefits taxable to

you exclude more interest income than what you have

Montana are less than those that you reported on Form

reported in your federal adjusted gross income.

2M, line 13b, enter that difference as a subtraction to

Line 30 – Exemption for Certain Taxed Tips and

federal adjusted gross income on your Form 2M, line 32. If

Gratuities. You can subtract from your federal adjusted

your social security benefits are greater than those that

gross income any tips and gratuities that you have

you reported on Form 2M, line 13b, you should report that

received from patrons while you worked in the food,

difference as an addition to federal adjusted gross income

beverage or lodging industry. These should be reported as

on your Form 2M, line 23.

part of your federal adjusted gross income. All other tips

Line 33 – Tier II Railroad Retirement. If any of your

and gratuities that you received for providing services in

retirement income is from Tier II Railroad Retirement,

other business industries are not excluded from your

these benefits are 100% exempt from Montana taxation.

federal adjusted gross income in arriving at your Montana

You should exclude your entire taxable Tier II Railroad

adjusted gross income.

Retirement benefits on Form 2M, line 33.

Line 31– Exempt Medical Care Savings Account (MSA)

Line 35 – Add lines 20 and 25 then subtract line 34 and

Deposits and Earnings. To determine your Montana

enter the result on line 35. This is your Montana adjusted

adjusted gross income you can subtract from your federal

gross income.

adjusted gross income the amounts that you deposited

into a Montana medical care savings account. Please

Line 37 – Standard or Itemized Deductions. In most

don’t confuse this Montana MSA with the federal health

cases, your state income tax will be less if you take either

savings account (HSA) that is deductible on Form 2, line

the larger of your itemized deductions or the standard

25 since you are allowed to participate in both programs.

deduction.

See your federal income tax instructions for information

When you claim your standard deduction or itemized

on your federal HSA.

deductions, remember to check the box on line 37 that

Your Montana medical care savings account provides you

identifies which method you are using. If you do not check

with the opportunity to exclude from your Montana

the appropriate box, this will delay the processing of your

adjusted gross income up to $3,000 plus accumulated

return.

interest or other earnings on these funds annually. If you

• Standard Deduction. To calculate your standard

are married filing jointly with your spouse or married filing

deduction, complete Form W, Worksheet V on page 51.

separately with your spouse, both of you can qualify for

your own Montana MSA and you each can exclude up to

• Itemized Deductions. To figure your itemized

$3,000 plus accumulated interest or other earnings on this

deductions, complete Form 2M, Schedule I. You can

account annually. To qualify for this exclusion, you will

find the instructions for Form 2M, Schedule I on page

need to establish a separate account that is owned by you

14 of this instruction booklet.

alone and is not jointly held with your spouse or any other

Line 39 – Exemption. You are entitled to at least one

individuals. In addition, you cannot commingle other funds

exemption (your own) and possibly even more. Multiply

with this account. Once these funds are excluded from

$1,980 times the number of exemptions that you have

Montana adjusted gross income, they can be withdrawn

claimed on Form 2M, line 5d and enter the result on line 39.

only for the payment of qualified medical expenses for

yourself, your spouse, or your dependent. Any of these

Line 40 – Taxable Income. To compute your taxable

funds withdrawn for other purposes are subject to tax in

income, subtract line 39 from line 38 and enter the result

the year that they are withdrawn and they also may be

on line 40.

subject to a 10% penalty if they are withdrawn on any day

other than the last business day of the year.

For further instructions on the Montana medical care

savings account see Montana Forms MSA and MSA-P.

When you claim this exclusion, you will need to attach a

copy of Montana Form MSA to your income tax return.

Line 32 – Subtraction to Federal Taxable Social

Security/Tier I Railroad Retirement. Your social security

benefits taxable to Montana may be different from the

amount of taxable benefits that you reported on Form 2M,

line 13b. You should determine your Montana taxable

social security benefits by completing Montana Form W,

Montana Individual Income Tax Forms And Instructions - 2006 Page 4

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