What's New for 2007
Toll Free Number:
This year, the Montana Department of Revenue is offering a toll free number. You may call us for assistance at 1-866-859-2254 during business hours. If you are calling from the Helena area, please dial 444-6900.
Montana Law Changes for Tax Year 2007
$140 Homeowner Income Tax Credit for Property Taxes
Please note: Some tax practitioners and taxpayers have reported that they filed a 2007 Montana individual income tax return using tax software that did not provide an adequate prompt for the $140 Montana Homeowner Property Tax Credit. Because of this, they inadvertently missed the credit even though they may have been entitled to it. If this has happened to you, you may still apply for the credit. If you have already filed your tax return and it does not reflect the credit, simply submit Form PTC - Montana Homeowner Property Tax Credit. Your tax return will be adjusted to reflect the credit, provided that you qualify to receive it. If your tax return has already been processed, a $140 refund will be issued to you based on information included on the Form PTC.
A refundable tax credit of $140 is available for property taxes paid in 2007 for your principal residence, if you meet certain qualifications. Although there are similarities regarding who may qualify, this state income tax credit should not be confused with the $400 property tax refund issued to eligible homeowners in 2007 for property taxes paid in 2006 (or earlier years, in some cases). In order to claim the credit, you must answer YES to all of the following:
- The property for which the credit is claimed is a single-family dwelling, unit of a multiple-unit dwelling, manufactured home, or mobile home.
- I occupied the property as the owner for at least seven months in 2007.
- I paid property taxes in 2007 on the listed property.
Please note the following:
- You must have been the direct owner of the residence in order to be eligible for the credit. If your residence was owned by a partnership, corporation or other legal entity, the credit cannot be claimed even if you own interest in the entity.
- Only one claim can be made with respect to any property
- Married taxpayers who jointly own the property and are filing separately on the same form may allocate this credit.
If you are not required to file a Montana tax return because your income for 2007 is below the filing threshold but you are eligible for this refundable tax credit, complete Form PTC “Montana Income Tax Credit for Property Taxes” and mail it to:
Department of Revenue
P O Box 6577
Helena, MT 59604-6577
If you are required to file a Montana tax return, please enter the credit on one of the following lines:
- If you file Form 2EZ, enter the $140 on line 18.
- If you file Form 2M, enter the $140 on Schedule II, line 10.
- If you file Form 2, enter the $140 on Schedule V, line 29.
Do not complete Form PTC and attach to your return. Instead, when you sign your tax return, you are declaring that you can answer yes to the three qualifying questions.
Taxability of $400 Homeowner Property Tax Refund
Married Filing Separately
Beginning with tax year 2007, married taxpayers who filed a joint federal return but file separately for Montana purposes are no longer required to adjust some income, losses and deductions on their state return.
Senate Bill 281, passed by the 2007 Montana Legislature, allows taxpayers who are married but filing separate returns to report the same amount on their state return as they would be allowed under the federal rules for joint filers for the following items:
- Passive and rental activity losses
- Capital losses
- IRA contributions
- Student loan interest deduction
- Tuition and fees deduction
There is no retroactive applicability. Taxpayers cannot “catch-up” for previously disallowed tuition and fees deduction, student loan interest or IRA contributions. The Montana taxable Social Security amount is not impacted by the new law.
Combined amounts cannot exceed the allowable amount under joint rules. For example, capital losses are limited to $3,000 total. Spouse A has a $5,000 current year capital gain and spouse B has a $9,000 capital loss carried over from prior years for state purposes but which had been absorbed on their federal return in a prior year. If the spouses file in Montana as “married filing separately”, spouse A should report the $5,000 capital gain on the appropriate line of the “Federal Income” portion of the return and report $5,000 as a “Capital Loss Adjustment” on Schedule II, Montana Subtractions from Federal Adjusted Gross Income. Spouse B should report $3,000 on the same line on Schedule II since the capital loss is attributable to them. Spouse B will then have a remaining capital loss carryover of $1,000 ($9,000 current capital loss less $8,000 used). Click here for additional examples.
Penalty for Late Payment of Taxes
Effective for tax periods beginning on or after January 1, 2007, the penalty for not paying a tax when due decreases from 1.5% to 1.2% per month, or a fraction of a month, with a maximum penalty of 12% (formerly 18%).
Capital Gains Tax Credit
Effective for tax years beginning on or after January 1, 2007, the tax credit for capital gains increases from 1% to 2% of the net capital gains included in your Montana taxable income.
National Guard Life Insurance Reimbursement
The excludable premium reimbursement amount was increased from $16.25 to $17.50 a month. In addition, individuals eligible for life insurance expanded to include members of the "armed forces".
Adoption Tax Credit
If you finalized the adoption of a child in 2007 that qualifies for the federal adoption credit, you are now eligible for the state income tax credit. This credit is equal to $1,000 in the tax year the adoption is final. An eligible child is a child under age 18, or any disabled person physically or mentally unable to take care of himself or herself. In accordance with federal rules, the legal adoption of a stepchild does not qualify for the credit. Please attach a copy of federal Form 8839.
Changes to Existing Credits
Rural Physician’s Credit
The credit for a physician practicing in a rural area will be phased out, but the educational loan repayment program for physicians serving these areas will be expanded. Because of this change, 2007 is the last year a licensed physician can commence practice in a rural area to qualify for the credit.
Qualified Endowment Credit
The termination date was extended from December 31, 2007 to December 31, 2013. In addition, the definition of “permanent, irrevocable trust” was clarified to exclude funds where contributions are expended for buildings or equipment.
Film Production Credit
The Big Sky on the Big Screen Act was amended by removing the $1 million limitation on the amounts of tax credits allowed, standardized the application fee for tax credits at $500, increased the percentage used to determine the amount of allowable tax credits for Montana labor from 12% to 14%, and for qualified expenditures from 8% to 9%.
Biodiesel Credits
The “biodiesel” credits, which include the Oilseed Crushing and Biodiesel, Biolubricant Production Facility Credit, and the Biodiesel Blending and Storage Credit, were amended. The credit was extended form 2010 to 2015 and provides for a seven year carryforward. “Biolubricant” was also further defined.
Federal Law Changes for Tax Year 2007
Qualified Mortgage Insurance Premiums
A federal change allows individuals who entered into a contract for qualified mortgage insurance in 2007 to claim the premiums paid during the year as an itemized deduction, if certain qualifications apply. If you are eligible, and your federal adjusted gross income exceeds $100,000, the amount you can deduct is reduced. The new Montana Qualified Mortgage Insurance Premiums Worksheet will assist you in determining the amount you can deduct.
State and Local General Sales Tax Deduction - Montana Itemized Deductions
The “American Jobs Creation Act of 2004” provided for an election to deduct state and local sales tax in lieu of state and local income taxes for tax federal purposes. With Montana’s tie to federal tax deductions and our reference to IRC Section 161, our statute does not speak directly to the disallowance of state and local general sales tax as a state deduction, such as it does for state income taxes (MCA 15-30-121).
When drafting the 2005 state income tax return, it was determined that a taxpayer be allowed to report either the federal income tax deduction OR the state and local general sales tax deduction for state purposes, which would be similar to the federal provision to allow an income or sales tax deduction. This election was subsequently included on the 2006 and 2007 state income tax returns as well.
However, after recent analysis, it has been determined that the taxpayers should not have been required to elect between the federal income tax and the state and local sales tax deduction and that both deductions are allowed. Since this information differs from what is reported on the 2005 through 2007 income tax returns, please note the following:
- 2007 Montana Form 2, Schedule III “Montana Itemized Deductions”: Any state and local sales tax paid in 2007 may be deducted. Please report this deduction on Line 11 “Other Deductible Taxes” instead of including it with the federal income tax deduction on line 7e. If you are filing Form 2M, please report the state and local sales tax deduction on Line 10 “Other Deductible Taxes”. Retain all necessary documentation supporting the deduction for the state and local sales tax deduction.
- 2005 and 2006 Montana individual income tax returns: If applicable, you may file amended tax returns for the 2005 and/or 2006 tax year to reflect a deduction for state and local sales tax in addition to the federal income tax deduction.
Errors Found in Tax Materials
To date, the Department of Revenue has identified the following error(s) in our income tax booklets that may impact taxpayers. The downloadable income tax booklet and associated forms on the department's Internet site have been corrected.- Form 2M, Worksheet VIII "Taxable Social Security Benefits for Form 2M": Line 6 should read “ Add the amounts on Form 2M, lines 16, 17,
and 19, 29 through 33, 35 and 36 and enter the result here” .
The Montana Department of Revenue has revised its Worksheet VIII, also known as the "taxable social security benefits" worksheet, for tax year 2007. The worksheet revision incorporates Montana adjustments to income which had erroneously been omitted from the previous version of the worksheet. The department provides Worksheet VIII each year to assist taxpayers in calculating how much of their social security benefits are taxable in Montana.
- Form FID-3 – On page 2 of the Form FID-3, an incorrect reference was made to the federal extension form that must be filed to receive your Montana extension. The correct form is federal Form 7004.
Taxpayer Assistance Resources
Call Center
Please call the Montana Department of Revenue’s Call Center with your state income tax questions between 8 a.m. - 5 p.m., Monday - Friday. This year, you can call us toll-free at 1-866-859-2254 (444-6900 in Helena). Telephone Device for the Deaf (TDD) - (406) 444-2830.
Note: Lowest volume of calls is typically received in the midmorning (9 - 11 a.m.), so this is a good time for taxpayers to call with minimal wait. Highest volume of calls is typically received in the early afternoon (1:30 - 3:30 p.m.), and the wait for taxpayers may be several minutes during this period.
Websites
The Montana Department of Revenue’s website, mt.gov/revenue, contains a variety of filing information, including tax season updates, electronic filing options, helpful resources and more. The Montana Free File website, MontanaFreeFile.org, provides information on free electronic filing, volunteer tax preparation sites, free Internet locations, and other tax-related topics.
Walk-in Assistance
Taxpayer assistance is available year-round at the Montana Department of Revenue’s office at the Mitchell Building in Helena. However, during income tax season the department offers special taxpayer assistance statewide.
e-File Service Locations
Beginning the week of February 4, you can drop by selected Department of Revenue offices statewide to electronically file your state income tax return (Form 2EZ, 2M or 2EC)…for free. Simply prepare your state income tax return in advance, and bring it to one of the eleven participating DOR offices. You can electronically file your state income tax return at no cost to you. Participating DOR offices include:
| City | Address | Contact | Phone | Hours |
| Butte | 155 West Granite St | Brenda Peacher and Kimberly Pewitt | 228-4147 or 228-6232 or 228-6236 | 9am - 4pm M-F |
| Dillon | 205 E Center | Anita Clason and Cathy Hucke | 683-4000 | 9am - 4pm M-F |
| Forsyth | 1200 Main St | Sandra Arneson and Sherri Boyer | 346-2516 | 9am - 4pm M-F |
| Helena | 125 N Roberts, Rm 160 | Frank Ahl, Valerie Clague, and Edwina Rose | 444-7918 or 444-4064 | 8am - 5pm M-F |
| Libby | 952 E Spruce St | Judith Nixon and Rochelle Adamson | 293-6903 ext 224 | 9am - 4pm M-F |
| Kalispell | 100 Financial Drive | 758-5700 | 9am - 4pm M-F | |
| Plentywood | 100 W Laurel | Martha Kanning and Linda Bartnes | 765-3433 | 9am - 4pm M-F |
| Miles City | 1010 Main St | Roxie Davis, Jennifer Haddock and Kate Russell | 232-1295 | 9am - 4pm M-F |
| Red Lodge | 17 W 11th | Val Sharbono and Jeffifer Jessen | 446-1223 | 9am - 4pm M-F |
| Missoula | 2681 Palmer St | 329-1400 | 9am - 4pm M-F |
In addition, there are more than 70 volunteer tax preparation sites around the state through Volunteer Income Tax Assistance (VITA) and the AARP Tax-Aide Montana program. A comprehensive listing of these volunteer tax preparation sites and who qualifies for their services can be found at MontanaFreeFile.org.
E-file Administration Information for Practitioners, Transmitters, Developers
David Berg, Electronic Tax Program Coordinator
Telephone: (406) 444-6957
Fax: (406) 444-1505
E-mail: daberg@mt.gov
Tax Forms
The most commonly used Montana forms, worksheets and instructions are available here for you to download.
Paper forms are available at:
3rd Floor Reception Desk
Sam W. Mitchell Bldg.
125 N. Roberts
Helena, Montana
Just east of the Capitol building
