Administrative Rules of Montana › Department 42 - REVENUE › Chapter 42.15 - INCOME TAX › Subchapter 42.15.2 - Montana Additions and Subtractions › Rule 42.15.206 - ADDITIONS AND SUBTRACTIONS FOR MARRIED TAXPAYERS FILING SEPARATE RETURNS

Current through Register Vol. 13, July 5, 2024
(1) Except as provided in (2) and (3),
				married taxpayers who file a joint federal return but separate Montana returns
				must compute their taxable income using the federal rules for married taxpayers
				filing separately. Items clearly attributable to one spouse must be claimed by
				that spouse. An item not clearly attributable to one spouse must be divided
				equally unless the spouses enter into a binding written agreement providing a
				different division.
(2) The
				following items are exceptions to (1) as provided for in
				15-30-111, MCA:
(a) Married taxpayers filing a joint federal
				return allowed a capital loss deduction under section 1211 of the Internal
				Revenue Code, 26 U.S.C.
				1211, and who file separate Montana returns
				may claim the same amount of capital loss deduction allowed on the federal
				return. If the allowable capital loss is clearly attributable to one spouse,
				the loss must be shown on that spouse's return. If the loss is not clearly
				attributable to one spouse, the loss must be split equally between each return.
				The aggregate loss of spouses attributable to a capital loss can never exceed
				the amount of losses allowable for federal income tax purposes to spouses
				filing a joint federal income tax return for that loss. For example, 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).
(b) Married
				taxpayers filing a joint federal return allowed passive and rental income
				losses are not required to recompute allowable losses according to the federal
				rules for married taxpayers filing separately under section 469 of the Internal
				Revenue Code, 26 U.S.C.
				469. If the allowable loss is clearly
				attributable to one spouse, the loss must be shown on that spouse's return. If
				the loss is not clearly attributable to one spouse, the loss must be split
				equally between each return. The aggregate losses of spouses attributable to a
				passive loss or rental loss can never exceed the amount of losses allowable for
				federal income tax purposes to spouses filing a joint federal income tax return
				for that loss.
(c) Married
				taxpayers filing a joint federal return in which one or both of the taxpayers
				are allowed a deduction for an individual retirement contribution under section
				219 of the Internal Revenue Code,
				26 U.S.C.
				219, and who file separate Montana income tax
				returns may claim the same amount of the deduction that is allowed on the
				federal return. The deduction must be attributed to the spouse who made the
				contribution. This provision does not affect any contributions made for tax
				years beginning before January 1, 2007.
(d) Married taxpayers filing a joint federal
				return who are allowed a deduction for interest paid for a qualified education
				loan under section 221 of the Internal Revenue Code,
				26 U.S.C.
				221, and who file separate Montana income tax
				returns may claim the same amount of the deduction that is allowed on the
				federal return. The deduction may be split equally on each return or in
				proportion to each taxpayer's share of federal adjusted gross income. This
				provision does not affect any interest paid during tax years beginning before
				January 1, 2007 for which the deduction was not allowed on the Montana tax
				return.
(e) Married taxpayers
				filing a joint federal return who are allowed a deduction for qualified tuition
				and related expenses under section 222 of the Internal Revenue Code,
				26 U.S.C.
				222, and who file separate Montana returns
				may claim the same amount of the deduction that is allowed on the federal
				return. The deduction may be split equally on each return or in proportion to
				each taxpayer's share of federal adjusted gross income. This provision does not
				affect any expenses paid during tax years beginning before January 1, 2007, for
				which the deduction was not allowed on the Montana tax return.