MaxGhenis · Nov 8, 2026 · Nov 8, 2026 · Nov 9, 2026 · Nov 11, 2026 · Nov 11, 2026
diff --git a/changelog.d/fix-mt-military-retirement-exemption.added.md b/changelog.d/fix-mt-military-retirement-exemption.added.md
@@ -0,0 +1 @@
+Montana's working military retirement and survivor benefit exemption (MCA 15-30-2120(3)(n)) from tax year 2024: the lesser of half the return's military retirement pay or its Montana earned income, plus half of military survivor benefits.
diff --git a/...ters/gov/states/mt/tax/income/subtractions/military_retirement/earned_income_sources.yaml b/...ters/gov/states/mt/tax/income/subtractions/military_retirement/earned_income_sources.yaml
@@ -0,0 +1,24 @@
+description: Montana counts these income sources as the Montana source wage income that limits the working military retirement exemption.
+values:
+  2024-01-01:
+    # 15-30-2120(8)(b)(i); Form WMRE line 2: wages on Form 1040 line 1z.
+    - irs_employment_income
+    # (8)(b)(ii); line 3: Schedule 1 line 3, which nets all Schedule C
+    # income, including a specified service trade or business.
+    - total_self_employment_income
+    # (8)(b)(ii); line 4: partnership and S corporation income.
+    - partnership_s_corp_income
+    # (8)(b)(iii); line 5: net farming income, which PolicyEngine holds as
+    # Schedule F income.
+    - farm_operations_income
+metadata:
+  unit: list
+  period: year
+  label: Montana working military retirement exemption earned income sources
+  reference:
+    - title: MCA 15-30-2120(8)(b)
+      href: https://archive.legmt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0200/0150-0300-0210-0200.html
+    - title: ARM 42.15.1501(2)
+      href: https://www.law.cornell.edu/regulations/montana/Mont-Admin-r-42.15.1501
+    - title: "2025 Montana Form WMRE, Part II, lines 2 to 5 and their instructions #page 1,3"
+      href: https://revenue.mt.gov/files/Forms/Montana-Working-Military-Retirement-and-Survivor-Benefit-Exemption.pdf#page=1
diff --git a/...ne_us/parameters/gov/states/mt/tax/income/subtractions/military_retirement/in_effect.yaml b/...ne_us/parameters/gov/states/mt/tax/income/subtractions/military_retirement/in_effect.yaml
@@ -0,0 +1,16 @@
+description: Montana allows the working military retirement and survivor benefit exemption when this is true.
+values:
+  0000-01-01: false
+  # 15-30-2120(3)(n) first applies to tax year 2024.
+  2024-01-01: true
+metadata:
+  unit: bool
+  period: year
+  label: Montana military retirement exemption in effect
+  reference:
+    - title: MCA 15-30-2120(3)(n)
+      href: https://archive.legmt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0200/0150-0300-0210-0200.html
+    - title: 2024 Montana Form 2 instructions, Other Legislation Affecting Tax Year 2024 (Senate Bill 104)
+      href: https://revenue.mt.gov/files/forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2024_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=6
+    - title: Montana Revenue Interim Committee, Tax Benefits for Veterans (November 2025)
+      href: https://archive.legmt.gov/content/Committees/Interim/2025-2026/RIC/Meetings/November_12_13_2025/veteran-tax-benefits.pdf#page=1
diff --git a/...yengine_us/parameters/gov/states/mt/tax/income/subtractions/military_retirement/rate.yaml b/...yengine_us/parameters/gov/states/mt/tax/income/subtractions/military_retirement/rate.yaml
@@ -0,0 +1,12 @@
+description: Montana subtracts this share of military retirement pay, up to the filer's Montana earned income, under the working military retirement exemption.
+values:
+  2024-01-01: 0.5
+metadata:
+  unit: /1
+  period: year
+  label: Montana working military retirement exemption rate
+  reference:
+    - title: MCA 15-30-2120(3)(n)(i) and (8)(a)
+      href: https://archive.legmt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0200/0150-0300-0210-0200.html
+    - title: 2025 Montana Form WMRE, Part II, line 7
+      href: https://revenue.mt.gov/files/Forms/Montana-Working-Military-Retirement-and-Survivor-Benefit-Exemption.pdf#page=1
diff --git a/...s/parameters/gov/states/mt/tax/income/subtractions/military_retirement/survivor_rate.yaml b/...s/parameters/gov/states/mt/tax/income/subtractions/military_retirement/survivor_rate.yaml
@@ -0,0 +1,12 @@
+description: Montana subtracts this share of military survivor benefits under the survivor benefit exemption.
+values:
+  2024-01-01: 0.5
+metadata:
+  unit: /1
+  period: year
+  label: Montana military survivor benefit exemption rate
+  reference:
+    - title: MCA 15-30-2120(3)(n)(ii)
+      href: https://archive.legmt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0200/0150-0300-0210-0200.html
+    - title: 2025 Montana Form WMRE, Part III, line 2
+      href: https://revenue.mt.gov/files/Forms/Montana-Working-Military-Retirement-and-Survivor-Benefit-Exemption.pdf#page=1
diff --git a/policyengine_us/parameters/gov/states/mt/tax/income/subtractions/subtractions.yaml b/policyengine_us/parameters/gov/states/mt/tax/income/subtractions/subtractions.yaml
@@ -15,12 +15,11 @@ values:
     - salt_refund_income # Form 2 Subtractions Schedule
     - mt_other_subtractions
   2024-01-01:
-    # MCA 15-30-2120(3)(n) allows exempting up to 50% of military retirement pay
-    # (capped at MT earned income, (3)(n)(i)) and up to 50% of military survivor
-    # benefits regardless of other income ((3)(n)(ii), Form WMRE); not yet modeled.
     - mt_interest_exemption_person
     - mt_tuition_subtraction_person
     - mt_old_age_subtraction
+    # MCA 15-30-2120(3)(n), Form WMRE
+    - mt_military_retirement_exemption
     # 2021 Mont. Laws ch. 503 (SB 399) section 65 repealed 15-30-2110, MCA,
     # and with it the disability income exclusion, for tax years beginning
     # after December 31, 2023 (section 70(1)).
@@ -34,6 +33,8 @@ values:
     - mt_interest_exemption_person
     - mt_tuition_subtraction_person
     - mt_old_age_subtraction
+    # MCA 15-30-2120(3)(n), Form WMRE
+    - mt_military_retirement_exemption
     # TODO: Remove this subtraction starting in 2029 because the federal
     # Schedule 1-A deductions expire after 2028.
     - mt_federal_obbba_subtraction
@@ -54,6 +55,8 @@ metadata:
       href: https://leg.mt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0100/0150-0300-0210-0100.html
     - title: 2025 Montana Form 2 Instructions
       href: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2025_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf#page=21
+    - title: 2025 Montana Form WMRE
+      href: https://revenue.mt.gov/files/Forms/Montana-Working-Military-Retirement-and-Survivor-Benefit-Exemption.pdf#page=1
     - title: "2021 Montana Session Laws, chapter 503 (SB 399), section 65 (repealer) and section 70 (effective dates) #page 68,70"
       href: https://archive.legmt.gov/content/Publications/sales/2021SessionLaws_V3_ERRATA-VERSION.pdf#page=68
     - title: 2024 Montana Form 2 instructions, repealed deductions
Original file line number	Diff line number	Diff line change
		@@ -0,0 +1 @@
		Montana's working military retirement and survivor benefit exemption (MCA 15-30-2120(3)(n)) from tax year 2024: the lesser of half the return's military retirement pay or its Montana earned income, plus half of military survivor benefits.