Montana Military Filing Information
How do I know whether I am a full-year resident, nonresident, or a part-year resident of Montana for individual income tax purposes?
You are a resident of Montana for individual income tax purposes if you live in Montana or if you maintain a permanent home in Montana. A permanent home in Montana means a dwelling place you habitually use as your home, whether or not you own it and whether or not you may someday leave. You do not lose your Montana residency if you leave the state temporarily with the intention of returning. Your Montana residency is lost when you move outside of Montana with no intention of returning. Unless there is a specific exception under Montana law, if you establish Montana residency for any other purpose, you are considered a Montana resident for income tax purposes.
You are a nonresident of Montana if you were not a resident during any part of the tax year.
You are a part-year resident of Montana if you moved to or from Montana during the tax year with the intention of establishing a permanent residence in your new state. A nonresident or part-year resident who is required to file a Montana tax return needs to use Form 2.
Exempt Military Salary of Residents on Active Duty
If you are a Montana resident receiving military compensation and if this compensation is included in your federal adjusted gross income, you can subtract from your federal adjusted gross income your basic, special and incentive pay that you receive from:
● serving on active duty as a member of the regular armed forces
● being a member of a reserve component of the armed forces or as a member of the National Guard serving on active duty in a contingent operation as it is defined in 10 USC 101
● being a member of the National Guard and assigned to active service authorized by the President of the United States or the Secretary of Defense for a period of more than 30 consecutive days for the purpose of responding to a national emergency declared by the president and supported by federal funds.
Military compensation that you have received from the following activities cannot be subtracted from your federal adjusted gross income.
● Salaries that you have received for annual training and weekend duty
● Salaries that you have received for being a member of a reserve component of the armed forces that is not received under 10 USC 11
Salaries that you received for performing full-time National Guard duty under Title 32 of the United States Code
● Income you have received from retirement, retainer, equivalent pay or allowances When you claim this exemption, you will need to include verification of your military status (such as your military orders) with your Montana tax return.
Exempt Income of Nonresident Military Servicepersons
If you are a nonresident of Montana, living in Montana solely by reason of compliance with your military orders, you are not required to establish residency in Montana and your military compensation is not considered Montana source income and is not taxable to Montana. On this line, you should subtract the military compensation that you included in your federal adjusted gross income on Form 2, line 7.
If you have received any other income that is considered Montana source income (such as wages for civilian services performed in Montana or Montana business income), this income is taxable. You should complete a Montana tax return and report both your Montana source and non-Montana source income and then prorate your Montana tax liability on Form 2, Schedule IV.
Military Spouses Residency Relief Act
If you are the nonresident spouse of a nonresident military serviceperson and are in Montana solely to be with your military spouse who is serving in compliance with military orders, you may be covered under the Military Spouse Residency Relief Act and your compensation for personal services in Montana may be taxable by your home state.
Refunds of Withheld Montana Taxes on Wages
Because the act is retroactively effective to the beginning of 2009, nonresident military spouses who were employed in Montana may be entitled to claim a refund of Montana taxes withheld from the wages they earned in Montana during 2009 and each year following while in statute.
Important : To claim a refund the spouse must:
File a Montana individual income tax return - Form 2.
Check filing status as "nonresident".
Include with the return a copy of the service member's most current Leave and Earnings statement and the spouse's military ID card.
If the service member and nonmilitary spouse are both nonresidents, they may file jointly or separately - in either case the same procedure should be followed for sourcing the spouse's wage or personal service income to their state of residency.
For additional information regarding the MSRRA, please click here.