Updated October 21, 2026. Quick answer: Montana Form 2 is the individual income tax return, and Schedule I is where subtractions from federal taxable income are reported. For retirees the lines to find are line 13 for working military retirees and military survivor benefits and lines 22 and 23 for Railroad Retirement benefits. The Schedule I subtraction total carries to page 1, line 5.
What this form does
Schedule I is the Montana adjustments schedule that goes with Form 2. The instructions describe it in one sentence: “Use Schedule I to report all additions and subtractions to federal taxable income”. The retirement lines are subtractions in Part I.
The booklet also records a change affecting line 13: “Senate Bill 93 removes the expiration date for the military retirement income and survivor’s benefits subtraction.” For how Montana treats retirees overall, see Montana retirement taxes and whether Montana taxes pensions. Military retirement has a page of its own at Montana treatment of military retirement.
Who it applies to
Line 13 is limited by residency. The instructions say: “Retirees and beneficiaries must meet certain residency requirements to claim this subtraction.” “The subtraction is for taxpayers that became a Montana resident after June 30, 2023, or for a Montana resident that was a resident before receiving military retirement income or survivor benefits and remained a resident thereafter.”
They also say who is left out: “The exemption is not available to retirees or beneficiaries that were nonresidents when they began receiving military retirement if they became a resident before July 1, 2023, or if they were previously qualified to claim the exemption but become nonresidents after receiving the exemption in a future tax year.”
For survivors, the instructions name the plan: “Beneficiaries receiving military survivor benefits under the U.S. Department of Defense’s Survivor Benefit Plan can exempt up to 50% of their military survivor benefits.”
Lines 22 and 23 tie to benefits reported on the federal return, as the table below shows: line 22 points to Form 1040, line 6b, and line 23 to Form 1040, line 5b.
The lines, one by one
| Line | What the form says |
|---|---|
| Schedule I, purpose | “Use Schedule I to report all additions and subtractions to federal taxable income” |
| Line 13 | “Subtraction for working military retirees and military survivor benefits.” |
| Line 13, retirees | “Montana resident working military retirees may be eligible to subtract a portion of their military retirement income from Montana taxable income.” |
| Line 13, formula | “For military retirees, the subtraction is equal to the lesser of:” “50% of the taxpayer’s military retirement income, or” |
| Line 13, Montana source income | “The amount of Montana source income from:” “Net income from farming activities in Montana” (the list also has wages, salary and tips from compensation performed in Montana, and net income from a trade or business in Montana) |
| Line 13, survivors | “Beneficiaries receiving military survivor benefits under the U.S. Department of Defense’s Survivor Benefit Plan can exempt up to 50% of their military survivor benefits.” |
| Line 13, form to attach | “If you claim this subtraction, you must include Form WMRE with your return.” |
| Line 22 | “Montana does not tax federal Railroad Retirement Benefits paid by the Railroad Retirement Board.” “Enter the amount of Tier I benefits included on Form 1040, line 6b on line 22.” |
| Line 23 | “Include Tier II benefits included on Form 1040, line 5b, on line 23.” “Also include on line 23 any sickness benefits paid to you by the Railroad Retirement Board as reported on your Form W-2.” |
| Page 1, line 11b | “If you received pensions, retirement income, or IRA distributions, the Montana tax withheld is reported in Box 14 of your federal Form 1099-R.” |
| Schedule II, line 9 (nonresident) | “If you are a nonresident, the IRA distributions on Form 1040, line 4b, and pensions and annuities included on Form 1040, line 5b, are not Montana source income and not taxable to Montana.” |
| Schedule II, line 9 (part-year) | “If you are a part-year resident, enter all the taxable IRA distributions from Form 1040, line 4b, and pensions and annuities included on Form 1040, line 5b, received during that part of the year that you were a resident.” |
Income that arrives on a 1099-R is described on Form 1040 lines 5a and 5b and Form 1040 lines 4a and 4b, and the 1099-R boxes explained guide shows which box is which. Montana treatment of 401(k) and IRA withdrawals gives the state view of those accounts.
The figures the form prints
The percentage and the time limits for line 13 appear in running sentences. For retirees: “For military retirees, the subtraction is equal to the lesser of:” “50% of the taxpayer’s military retirement income, or”
The instructions then give the time limit: “The deduction can only be claimed for five consecutive years after meeting the eligibility requirements.” “For retirees or beneficiaries who were residents before July 1, 2023, the exemption is available for five years after tax year 2024, which is tax year 2028.”
Where the result goes next
The Schedule I subtraction total goes to page 1: “Enter the total of your Montana subtractions from Schedule I, Montana Adjustments Schedule, line 24.” Page 1 line 5 is described as the place for “Subtractions to federal taxable income are reported on Schedule I.”
Line 13 also asks for a form: “See Form WMRE for more information.” “If you claim this subtraction, you must include Form WMRE with your return.”
Edition and line numbers
This page reads the 2025 Montana Individual Income Tax Return Form 2 Instructions for tax year 2025, the current file Montana Department of Revenue served on 2026-10-21. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Forgetting the attached form for line 13. The instructions say “If you claim this subtraction, you must include Form WMRE with your return.”
- Putting Tier II railroad benefits on the Tier I line. The instructions say “Include Tier II benefits included on Form 1040, line 5b, on line 23.”
- Assuming a nonresident’s pension is Montana income. The instructions for Schedule II line 9 say “are not Montana source income and not taxable to Montana.”
Related: Montana retirement taxes, whether Montana taxes pensions, Montana treatment of military retirement, Montana treatment of 401(k) and IRA withdrawals, and Form 1040 lines 5a and 5b.
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Answer againSources
- 2025 Montana Individual Income Tax Return Form 2 Instructions, Montana Department of Revenue: revenuefiles.mt.gov
- Related official page (not quoted): Working Military Retirement Exemption, Montana Department of Revenue: revenue.mt.gov
Read from the state revenue documents linked above on October 21, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.