If you are a resident and you paid an income tax to another state or country on income that is also taxed to Montana, you may be entitled to a credit against your Montana income tax liability for these income taxes paid to another state or country. To determine if you have a credit, you will need to complete Form 2A, Schedule VI.

If you are a part-year resident and you paid an income tax to another state or country on income that is also taxed to Montana and if you included it as Montana source income on Form 2A, Schedule IV, lines 1 through 16, you may be entitled to a credit against your Montana part-year resident income tax liability for these income taxes paid to another state or country. To determine if you have a credit, you will need to complete Form 2A, Schedule VII.

If you are a shareholder of an S corporation or a partner in a partnership and your S. corporation or partnership pays an income tax to another state or country, you can claim a credit for your share of these income taxes paid by the entity. In order for you to claim this credit, however, the income tax paid by the S. corporation or partnership has to be measured by and imposed on net income. This credit also applies to excise taxes or franchise taxes that are paid by the S. corporation or partnership as long as they are imposed on and measured by net income. However, you are not allowed to use other taxes paid by your S corporation or partnership such as, but not limited to, franchise or license taxes or fees that are not imposed on or measured by net income, gross receipt taxes or gross sales taxes. When you claim this credit for the taxes paid by your S corporation or partnership, you will have to add back to your federal adjusted gross income in determining your Montana adjusted gross income, on Form 2A, Schedule I, line 14, your share of the S. corporation's or partnership's federal tax deduction that is included in your total on Form 2, line 17. This is required whether or not your S corporation or partnership separately or non-separately stated the income tax deduction on your federal Form K-1.

If you are required to file an income tax return in more than one state or country and you are entitled to this credit, you will have to complete a separate Form 2, Schedule VI or VII for each state or country in which you filed an income tax return and paid an income tax on income that is also taxed to Montana.

You will not be entitled to this credit if the other state or country in which you have filed an income tax return has allowed you a credit against the taxes that they have imposed on your net income because you are also subject to tax on the same income by Montana. When calculating this credit on Form 2A, Schedule VI, you cannot include in your income tax liability paid to the other state or country on line 4 any penalties and interest that you paid to the other state or country.

Back