Big Beautiful Bill Act to decrease income tax revenue for Montana
The federal One Big Beautiful Bill Act will have an arguably big impact on the state of Montana — a decrease of an estimated $114.2 million in revenue based on income tax changes alone, according to the Legislative Fiscal Division.
“That’s a significant amount of money,” said Sen. Greg Hertz, a Polson Republican and outgoing chairman of the Revenue Interim Committee.
The Revenue Interim Committee heard the estimate at a meeting Friday, one week after President Donald Trump signed the exhaustive tax cuts and spending legislation.
After the meeting, however, Hertz said the state of Montana is on track to collect more than $100 million on top of its estimated revenue.
“So those two will kind of offset,” Hertz said.
Research analyst Megan Moore reviewed the different changes and costs outlined in a Legislative Fiscal Division memo.
Moore said the memo focused on individual income tax provisions. She said the state links to federal taxable income for its own income tax purposes.
“So some of the changes made in that federal legislation are going to flow through automatically to Montana, barring any changes by the Legislature,” Moore said.
The following changes that will make up most of the annual $114.2 million deficit are retroactive to Jan. 1, 2025, according to the Legislative Fiscal Division:
An increase in the standard deduction by $750 for single filers and $1,500 for joint filers will result in $23.4 million in lost revenue to Montana. Changes also include making the larger standard deduction permanent.
An enhanced deduction for seniors who are 65 or older of $6,000 will cost $35.6 million. It is allowed through tax year 2028.
A car loan interest deduction for auto loans bought for personal use will cost $6.6 million. It’s allowed only through 2028. The vehicle must be new, and it must have “final assembly” completed in the U.S.
No tax on tips, allowed through 2028, will cost $4 million. That’s for qualified tips up to a maximum $25,000 received.
No tax on overtime compensation is estimated to cost $37 million and is allowed through 2028.
The memo also estimates a charitable deduction for filers who do not itemize that takes effect on Jan. 1, 2026, will cost $7.5 million a year and is a permanent change. The deduction is up to $1,000 per person or $2,000 for joint filers.
However, the memo said only limited data is available for Montana on car loan interest and overtime hours.
Rep. Mark Thane, a Missoula Democrat, said he would like to know how the drop impacts the bottom line budget for the state.
An economist from the Department of Revenue said he did not yet have the information.
A staff member with the Legislative Fiscal Division said he anticipates the analysis will be part of the information being compiled following the close of the most recent fiscal year.
After the meeting, Hertz said as Montana continues to grow, he believes growth in revenue will offset the money lost to the Big Beautiful Bill.
He also said the Legislature helped by not dropping income tax rates a whole point as Republican Gov. Greg Gianforte wanted — he wanted a top rate of 4.9% but lawmakers settled on 5.4%.
The federal legislation will impact dollars for Medicaid and SNAP, the Supplemental Nutrition Assistance Program, but Hertz said the revenue committee won’t review those items, although he believes other legislative committees will.
The Revenue Interim Committee also elected Rep. Larry Brewster, a Billings Republican, as its new chairman, and it named Sen. Dave Fern, a Whitefish Democrat, as vice chairman.
Keila Szpaller is deputy editor of the Daily Montanan, a nonprofit newsroom.