Bill > SB323

This bill makes several changes to Montana's individual income tax rates and earned income tax credit. First, it reduces the top marginal income tax rate for different taxpayer categories (married joint filers, heads of household, single individuals, and married individuals filing separately) from 5.9% to 5.4% in 2026 and then to 4.9% in 2027. The bill also reduces the tax rate on long-term capital gains from 4.1% to 3.9% across all taxpayer categories. Additionally, the legislation increases the state earned income tax credit from 10% to 15% of the federal earned income tax credit, which provides a more substantial tax benefit for low to moderate-income working individuals and families. The changes to income tax rates will be implemented gradually, with the first reduction taking effect on January 1, 2026, and the second reduction on January 1, 2027. The increased earned income tax credit will also begin applying to income tax years starting after December 31, 2025. The bill includes provisions for annual inflation adjustments to tax brackets and specifies that taxpayers can receive a refund if their earned income tax credit exceeds their tax liability.