This bill proposes significant changes to the state income taxation framework in Montana, specifically targeting military pensions, retirement income, and survivor benefits. It introduces an income tax exemption for these benefits received by retired members of the U.S. armed forces, the Montana Army National Guard, the Montana Air National Guard, and reserve components. The bill also amends the definition of "Montana source income" to include military pensions and survivor benefits while excluding compensation for non-resident armed service members who are in Montana solely due to military orders. Additionally, it clarifies adjustments to federal taxable income for determining Montana taxable income and establishes a delayed effective date for the new provisions.

Moreover, the bill modifies the treatment of military pensions and survivor benefits by removing previous limitations on the amount that could be subtracted from taxable income, allowing for the subtraction of all military-related income. It also introduces a new subtraction for taxpayers aged 65 and older, increasing their potential tax relief. The bill includes provisions for contributions to education savings accounts, allowing individuals to reduce their taxable income, and mandates annual adjustments for the senior subtraction based on inflation. The effective date for these changes is set for January 1, 2026, applicable to tax years beginning after December 31, 2025.

Statutes affected:
LC Text: 15-30-2101, 15-30-2120