MT taxable income missing federal Schedule 1-A senior deduction ($6,000 OBBBA) — § 15-30-2120 starts from federal taxable income

[PavelMakarchuk]

PE-US's mt_taxable_income_joint (and _indiv) computes Montana taxable income starting from mt_agi_joint (federal AGI), then subtracts mt_standard_deduction and MT-specific subtractions. This replicates the federal standard deduction + MT-specific items, but misses the federal Schedule 1-A "Enhanced Deduction for Seniors" added by OBBBA § 70103 (IRC § 151(d)(5)(B), Form 1040 Line 13b).

Per Mont. Code Ann. § 15-30-2120:

"The items in subsection (2) are added to and the items in subsection (3) are subtracted from federal taxable income to determine Montana taxable income."

So MT taxable income starts from federal taxable income (Form 1040 Line 15), not federal AGI. Federal taxable income already includes the federal $6,000 senior deduction.

Concrete failure

PolicyEngine/policyengine-taxsim#948 — HoH, single age 75, $25K wages, $17.5K interest, $12K pension, $16.7K SS, $3.5K childcare, 1 dep age 5:

Federal Form 1040 (TaxAct PDF):

• Line 11 AGI: $68,950
• Line 12 Std ded (incl. age-65 addition): $25,625
• Line 13b Schedule 1-A senior: $6,000
• Line 14 Total deductions: $31,625
• Line 15 Federal taxable income: $37,325

MT Form 2 (TaxAct):

• Line 1 Fed AGI: $68,950
• Line 2 Subtractions (= Line 14 above): $31,625 → MT effectively "starts from federal taxable income"
• Line 3 subtotal: $37,325
• Line 6 MT-specific (old-age subtraction): $5,660
• Line 7 MT taxable income: $31,665
• Line 8 MT tax: $1,488

PE-US current:

• mt_standard_deduction: $25,625 ✓ (replicates fed std + age-65)
• mt_old_age_subtraction: $5,660 ✓ (correctly per § 15-30-2120(3))
• Missing: federal Schedule 1-A senior deduction ($6,000)
• mt_taxable_income: $37,666 (exactly $6,000 over statute-correct $31,665)
• mt_income_tax: $1,842 (vs statute-correct ~$1,488)

Suggested fix

Either:

1. Change MT starting income to federal taxable income (Form 1040 Line 15) — mt_agi_joint/mt_agi_indiv should be taxable_income, not adjusted_gross_income. This is what § 15-30-2120 actually requires verbatim.

2. Add federal Schedule 1-A deductions to MT subtractions — keep starting from AGI but explicitly subtract additional_senior_deduction (and other Schedule 1-A items: tip deduction, overtime, car-loan interest) from MT AGI. Mathematically equivalent to (1) but easier to verify.

Approach (2) is less invasive and easier to test. The new federal subtractions to add to MT's subtraction list:

• additional_senior_deduction (OBBBA § 70103, IRC § 151(d)(5)(B))
• qualified_tip_deduction (OBBBA § 70201, IRC § 224)
• qualified_overtime_deduction (OBBBA § 70202, IRC § 225)
• qualified_passenger_vehicle_loan_interest_deduction (OBBBA § 70203)

(MT may also need explicit add-back rules if it doesn't want to fully conform — but the default per § 15-30-2120's "federal taxable income" framing is full conformity.)

Originating TAXSIM comparison

PolicyEngine/policyengine-taxsim#948

Integration test

- name: MT taxable income inherits federal Schedule 1-A senior deduction
  period: 2025
  input:
    people:
      head:
        age: 75
        employment_income: 25_000
        taxable_interest_income: 17_510.73
        taxable_pension_income: 12_218.48
        social_security_retirement: 16_731.73
      child:
        age: 5
        is_tax_unit_dependent: true
    tax_units:
      tax_unit:
        members: [head, child]
        tax_unit_childcare_expenses: 3_500
    households:
      household:
        members: [head, child]
        state_name: MT
  output:
    mt_taxable_income: 31_665  # ±100 for rounding
    mt_income_tax: 1_488       # ±5 for rounding

References

• Mont. Code Ann. § 15-30-2120 (statute)
• IRC § 151(d)(5)(B) — OBBBA enhanced senior deduction
• 2025 Montana Form 2 Instructions
• mt_taxable_income_joint.py
• mt_agi_joint.py