(1) For tax years beginning after December 31, 1994, a Montana resident who is an employee is allowed an itemized deduction of 50% of the medical health insurance premium payments that they actually paid during the tax year.

Example : Taxpayer X is an individual whose only income is from employment with XYZ company. His out-of-pocket costs for medical health insurance premiums during the year is $2,000. Under Montana law, he is allowed a 50% deduction of the $2,000 or $1,000 as an itemized deduction not subject to any reduction. The remaining $1,000 can be used as a medical expense that is subject to the percentage threshold amount in 15-30-121 , MCA.

(2) A self-employed individual is allowed an itemized deduction of 50% of the sum of the medical health insurance premium payments paid during the tax year less the amount claimed as a self-employed health insurance deduction when arriving at their federal adjusted gross income.

Example :  Taxpayer Z is a self-employed individual who pays $2,000 medical health insurance premiums during the year. Thirty percent of $2,000 or $600 is allowed as a self-employed health insurance deduction when arriving at federal adjusted gross income. Under Montana law the following formula is used:

 

$2,000 health premiums paid

    -   600 30% self-employed health insurance deductions

$1,400

 

$1,400 remaining balance of premiums paid

    -   700 50% of balance

$  700

 

The first $700 can be deducted as an itemized deduction not subject to a percentage threshold amount. The remaining $700 of medical health insurance premiums can be deducted under 15-30-121 , MCA, subject to the percentage OF MONTANA adjusted gross income threshold amount.

(3) If a person is both an employee and is self-employed, the calculation of the allowable medical health insurance itemized deduction is the same as in (2) .

(4) Medical health insurance premiums paid during the year cannot be deducted more than once in arriving at Montana adjusted gross income or as an itemized deduction.

(5) Those premiums that qualify as deductible medical health insurance premiums are the same as those allowed under federal law.