Montana legislature proposes tax reductions for contributions and military pensions

House Bill 860, introduced in the Montana Legislature on April 1, 2025, aims to enhance tax benefits for certain taxpayers, particularly those contributing to specific savings programs and military retirees. The bill proposes a reduction in taxable income for contributions made to "achieving a better life experience" programs, allowing taxpayers to deduct up to $3,000, or the amount contributed, whichever is less. This provision applies to contributions made by the taxpayer, their spouse, or their children, provided the children are Montana residents.

Additionally, the bill introduces a mechanism for adjusting tax benefits for seniors aged 65 and older, linking the subtraction from federal taxable income to an annual inflation factor. This adjustment aims to ensure that the tax relief remains relevant over time.

Another significant aspect of House Bill 860 is its focus on military pension and retirement income. The bill allows eligible taxpayers to subtract either their Montana source wage income or 50% of their military pension from their taxable income. However, this benefit is restricted to individuals who became Montana residents after June 30, 2023, or those who were residents prior to receiving military benefits and continued to reside in the state.

Debate surrounding the bill has centered on its potential fiscal impact on state revenues and the fairness of the tax benefits provided. Critics argue that the bill may disproportionately favor certain groups, while supporters contend that it encourages savings and supports military families.

The implications of House Bill 860 could be significant, particularly for retirees and families looking to invest in educational or disability savings programs. If passed, the bill may stimulate economic activity by incentivizing contributions to these programs, while also providing much-needed tax relief to military personnel and their families.

As the legislative session progresses, stakeholders will be closely monitoring the bill's journey through the Montana Legislature, with discussions likely to continue regarding its economic and social ramifications.