(1) An individual may claim a credit against their Montana individual income tax of up to 2 percent of their net capital gain. The credit is based on the net capital gain as shown on the individual's Montana individual income tax return. Spouses who file a joint return for federal income tax purposes but a separate return for Montana income tax and who elect to claim the same amount of capital loss deduction as shown on their joint federal income tax return as provided in 15-30-2110, MCA, must compute the capital gain credit consistently. The credit is nonrefundable and may not be carried back or carried forward to any other tax year. The credit must be applied before any other credit.

(2) A nonresident or a part-year resident must apply the credit to Montana tax computed as if he or she were a resident during the entire tax year.

(3) For an estate or trust filing a Form FID-3, Montana fiduciary return, the credit is calculated on the net capital gains reported minus any net capital gains distributed to any beneficiary.

(4) Married taxpayers filing separately must compute and report their capital gains and losses as provided in ARM 42.15.206.

(5) Spouses may elect to report all of their capital gains and losses separately for the current and future tax years. An election is made by claiming a capital gains credit calculated on a net capital gain amount that is different from the net capital gain shown on the taxpayer's joint federal income tax return, or claiming a capital loss deduction that is greater than the amount that would be allowed for federal income tax purposes if the taxpayer had filed a separate federal income tax return.

(6) The following are examples of how the credit is applied:

(a) Example: For tax year 2017, John and Barbara file a joint 2017 federal income tax return reporting $2,000 of net capital gain. John's income consists of $50,000 in wages and $8,000 of net capital gain. Barbara's income consists of $35,000 in wages and $6,000 of net capital loss. If they file separately rather than jointly for Montana, unless they elect to separately report their capital gains and losses for this and future years as provided in (5), their capital gain credit is 2 percent of their net capital gain of $2,000, or $40.

(b) Example: Assume the same facts as the example in (a) except that the spouses do elect to separately report their capital gains and losses as provided in (5). John may claim a capital gain credit of up to $160 ($8,000 x 2%) against his Montana income tax. Barbara is not entitled to claim any credit against her tax.�

�

�

�	Federal Return	Montana Return
�	�	Column A	Column B
Wages	$85,000	$50,000	$35,000
Sch. D capital gain (loss)	$�2,000	$ 8,000	$(6,000)
Fed. adjusted gross income	$87,000	$58,000	$32,000
Montana adjustment for capital loss limit	�	�	���� $ 4,500
�	�	�	�
Montana adjusted gross income	�	�	$36,500
Montana capital loss carryover	$94,500	$58,000	($4,500)

�

�