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Montana taxpayers completing their 2024 returns may encounter a series of changes that reflect the most significant state income tax overhaul in decades. The pivot comes from a reform passed by the 2021 Montana Legislature. It is designed to streamline and simplify the state’s tax code by aligning it more closely with federal standards.
From Federal to State: A New Starting Point
The most notable change? Montana taxable income begins with federal taxable income, a move intended to simplify the tax filing process. Yet, this shift has consequences. Familiar deductions and subtractions that once provided relief, like the full deduction of medical insurance premiums or exclusions for specific tips, have now been removed.
In their place, a new $5,500 deduction for taxpayers aged 65 and older has been introduced, marking a small but significant benefit for retirees. The result is a redistribution of tax burdens across income groups and life stages, particularly noticeable among fixed-income and middle-income filers.
The Withholding Effect: A Hidden Adjustment
Behind the scenes, the Montana Department of Revenue has retooled the withholding system to reflect the legislative changes. Employers received updated wage withholding tables and were advised to prompt workers to file a revised MW-4 form. While many employees may not have noticed the shift immediately, they might know when their refunds or tax-due amounts diverge from previous years.
Even if your income remained steady, your tax liability might not. That’s the unintended byproduct of systemic simplification, but it doesn’t always mean your return will be more straightforward or favorable.
Policy vs. Practice
For policymakers, Senate Bill 399 represents a triumph of tax conformity, reducing complexity and administrative friction. For individual taxpayers, however, the picture is more nuanced. The bill’s impact will vary depending on income structure, age, and filing status.
The Montana Department of Revenue encourages residents to review their pay stubs and withholding amounts. A mismatch now could mean a surprise come next April.
For a comprehensive overview of the changes, including FAQs and examples, the Department’s Simplification Hub provides detailed guidance.
As with all reforms, the full impact of Senate Bill 399 will only become clear as taxpayers absorb the new rules, some with relief and others with regret.
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