Why is my refund lower? Why do I owe more?
Montana implemented a revised tax system effective 2024, designed to align more closely with federal tax filing standards.
Sweeping changes mean many taxpayers will see changes to their 2024 Montana refund or even have a payment due.
Your Montana filing status must now be the same as your Federal filing status.
- Prior to the 2024 filing year, many couples were able to reduce their tax obligation (or increase their refund) by filing “Married Filing Separately on the Same Form”. This filing status no longer exists in Montana. If you file “Married Filing Jointly” on the Federal return, you must file with the same status on your Montana return.
Your FEDERAL standard or itemized deduction is also your MONTANA deduction. There is no longer an additional Montana deduction.
- In previous years, many of our clients itemized their deductions in Montana, including: medical expenses, real estate property taxes, light vehicle registration fees, charitable donations, limited political donations, and federal income taxes.
- Individuals who itemized federally and claim a state tax deduction must subtract that deduction from their Montana deduction.
- Personal Exemptions and Partial Pension Exemptions have been eliminated; the Partial Pension exemption has been replaced by a flat $5500/person credit for taxpayers aged 65+.
Insufficient Montana withholding from pay checks.
- Changes to Montana tax brackets and a higher filing threshold has left many employees with little to no withholding from their 2024 paychecks.
- Submitting a new MW-4 to your employer is the best correction for this issue. Some people need to request an amount of additional withholding to be sure enough is being reserved. Generally, individuals should aim for 5% Montana withholding from each check.
Social Security payments are no longer subject to additional Montana tax.
- This will lower many individuals’ tax obligations.
- In previous years, some taxpayers have paid additional tax on a portion of their social security income.
Changes to tax brackets mean most individuals are paying a lower percentage on their taxable income than in previous years.
- Taxpayers with a taxable income greater than $13,000 are being taxed at a lower rate than in previous years.
- Prior to 2024, everyone with a taxable income over $21,600 was taxed at a 6.75% rate. Tax rates for 2024 are fixed at either 4.7% or 5.9% depending on your income bracket.