Are the Montana Tax Rebates Taxable?

With tax filing time right around the corner, you may be wondering if your Montana income tax rebate or property tax rebate you received in 2023 are taxable on your 2023 tax return.

Federal taxability

According to the IRS, for federal purposes, the rebates are not taxable for most people. Individuals who claimed the standard deduction on their federal tax return (as most individuals do) will not pay any federal tax on their rebates.

However, individuals who itemized their federal deductions and deducted any Montana state taxes paid, are generally required to include the Montana state tax rebates in gross income on their federal income tax returns, to the extent that they received a federal income tax benefit from the prior federal income tax deductions. See the Form 1040 instructions for more information.

If you itemized your federal deductions on your 2022 Form 1040, you can download your Form 1099-G at http://get1099.mt.gov/ after January 31, 2024. This form will break out the amount of Montana tax rebates, as well as any Montana state income tax refund you received.

Montana taxability

For Montana purposes, neither rebate is subject to state income tax. This also includes the upcoming Property Tax Rebate available beginning on August 15, 2024.

State tax refunds included in federal adjusted gross income are not taxable in Montana. If a state tax refund is included in federal adjusted gross income, report that amount on Form 2, Subtractions Schedule, line 1.