Montana Tax Benefit Rule for Federal Income Tax Refund (OBSOLETE)

Tax Benefit Rule for Federal Income Tax Refund (OBSOLETE)
Form 2 Worksheet II
Clear Form
Page 44	

DO NOT FILE WITH YOUR RETURN - For Reference Only	

2017 Worksheets

Worksheet II – Tax Benefit Rule for Federal Income Tax Refund

(Do not complete this worksheet if you claimed the Montana standard deduction on your 2016 Montana return.)
A tax benefit recovery occurs when an amount you claimed as a deduction or
credit in an earlier tax year is returned to you. Recoveries are taxable to the
extent that you received a tax benefit from the deduction or credit.
The most common recovery in Montana is when you receive a federal tax
refund during the current tax year for the paid federal taxes you included as
an itemized deduction on the previous year’s Montana return. A simple way to
check if your federal refund is taxable is to subtract the refund you received in
2017 from the total federal income taxes you reported on Schedule III, lines 7a
through 7d on your 2016 Montana return. If the result is larger than the $5,000
(or $10,000 if filing a joint return) you were allowed to deduct on line 7e on
Schedule III of your 2016 Montana return, none of the refund is taxable.
This worksheet will help you determine how much, if any, of your federal tax
refund you received in 2017 is taxable to Montana. You may use this worksheet
only if all three of the following conditions exist:

•	 You received a federal tax refund in 2017;
•	 You claimed itemized deductions on your 2016 Montana return; and
•	 Your only tax benefit recovery in 2017 was a refund of federal taxes you
claimed as a deduction on your 2016 Montana return.
If all three conditions do not exist, you need to use Worksheet IX, Tax Benefit
Rule Recovery of Itemized Deductions. You also need to use Worksheet IX
if you received a federal refund for taxes you reported in a year other than
2016 or you recovered any other item that you claimed as a deduction on
your Montana return in 2016 or any other year (for instance, your insurance
company reimbursed you for a medical expense you claimed as an itemized
deduction).
You can get Worksheet IX by visiting revenue.mt.gov or by calling us at
(406) 444-6900.

Before you begin, see the instructions above and on page 14 for Schedule I, line 3 to determine if you
need to complete Worksheet II.

Column A (for single, joint,
separate, or head
of household)

Column B (for spouse
when filing separately
using filing status 3a)

1 Enter your total federal taxes paid in 2016 as reported on Form 2, Schedule III, lines 7a
through 7d........................................................................................................................................... 	

1

1

2 Enter the federal income tax refund you received in 2017
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2

2

3 Enter any refundable credits claimed on your 2016 federal Form 1040, lines 66a, 67, 68, 69, 72 and
73. If in 2016 you filed 1040A or 1040EZ, enter the amounts from Form 1040A lines 42a, 43, 44 and
45; or Form 1040EZ line 8a. These items are not attributable to taxes you paid................................

3

3

4 Is line 3 greater than or equal to line 2? If yes, stop; your federal refund is not taxable. If no,
subtract line 3 from line 2, and enter the result here. This is the portion of your federal refund
that is a result of taxes you paid..........................................................................................................

4

4

5 Subtract line 4 from line 1 and enter the result here, but not less than zero. This amount is your
federal income taxes paid that were not refunded to you....................................................................

5

5

6 Enter the federal income taxes you deducted for 2016 as reported on Form 2, Schedule III,
line 7e..................................................................................................................................................

6

6

7 Is line 5 larger than line 6? If yes, stop; your federal refund is not taxable. If no, subtract line 5
from line 6, and enter the result here. This is the amount of taxes you deducted that were
refunded to you....................................................................................................................................

7

7

8 Enter the itemized deduction you claimed on your 2016 Montana Form 2, Schedule III, line 30.
If you took the standard deduction, stop; your federal income tax refund is not taxable.....................

8

8

9 Enter your 2016 Montana adjusted gross income from Form 2, line 41
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9

9

•	 If your filing status was single or married filing separately, enter 20% (0.20) of line 9, but
not less than $1,980 or more than $4,460.
•	 If your filing status was married filing jointly or head of household, enter 20% (0.20) of
line 9, but not less than $3,960 or more than $8,920..............................................................

10

10

11 Subtract line 10 from line 8, and enter the result here. If the result is less than zero, stop;
your federal refund is not taxable because you didn’t receive a benefit from deducting federal
income taxes.......................................................................................................................................

11

11

12 Enter the smaller of line 7 or line 11 here. This is the portion of your federal tax deduction that
reduced your taxable income and was refunded in 20172�������������������������������������������������������������������

12

12

13 Enter here your 2016 Montana taxable income from Form 2, line 45. If your amount is less than
zero, enter this amount as a negative amount....................................................................................

13

13

14

14

10 2016 standard deduction. Enter the amount below that corresponds to your 2016 Montana
individual income tax filing status.

14 If line 13 is zero or more, enter the amount from line 12 here and on Form 2, Schedule I, line 3.
This is your taxable federal income tax refund.
If line 13 is less than zero (a negative amount), add lines 12 and 13.
•	 If your result remains less than zero (a negative amount), enter zero and stop here. None
of your federal refund is taxable to Montana.
•	 If your result is greater than zero (a positive amount), enter that amount here and on Form
2, Schedule I, line 3. This is your taxable federal income tax refund.................................