House Taxation training: SB 399 changes income tax base, filing status and many deductions

Chair Fielder convened a House Taxation Committee training on income tax policy in which Legislative Fiscal Division staff outlined structural changes to Montana individual income tax that took effect for tax year 2024.

The training focused on Senate Bill 399 and related statutory changes. Staff said the most important shifts are a move from starting Montana calculations with federal adjusted gross income to starting from federal taxable income, and a change from a single statewide rate schedule to separate rate schedules by filing status (single, head of household, married filing jointly). "We are now linking to federal taxable income," the presenter said, noting that this causes Montana to adopt federal standard and itemized deductions for state calculations.

The nut graf: those structural changes alter how Montana taxable income is computed and how taxpayers must choose filing status, and they were accompanied by multiple repeals of deductions and credits that previously reduced Montana taxable income or tax liability.

Body: Staff explained that before the changes Montana started its computation from federal adjusted gross income and then applied Montana-specific deductions and personal exemptions. With Senate Bill 399, Montana now starts from federal taxable income, meaning taxpayers must use the same filing status on their state return as on their federal return. The presenter said this ended a practice in which some filers used different statuses at the state and federal levels when Montana previously used a single rate table.

The training listed deduction and credit changes. Several subtractions that existed before 2024 were repealed, the presenter said; exceptions include a $5,500 subtraction for taxpayers age 65 and older and a partial military retiree income exemption enacted in Senate Bill 104. Staff also noted that many tax credits were repealed in 2022 and went into effect for tax year 2023.

Staff cautioned the committee to watch federal law: the presenter noted the 2017 Tax Cuts and Jobs Act increased the federal standard deduction and removed personal exemptions, and that provision is scheduled to expire in 2025 unless Congress acts. "Watch what happens with the Tax Cuts and Jobs Act at the federal level because it could affect Montana's income taxes," the presenter said.

The training closed with a transition to the Legislative Fiscal Division's revenue presentation.

Ending: Committee members were informed this was a high-level overview intended to orient legislators ahead of executive action scheduled later in the week; no committee votes or formal actions were taken during the training session.