Montana Elderly Homeowner/Renter Credit

Quick Facts

• Refundable credit: Provides up to $1,150 for qualifying seniors based on property taxes or rent paid on their principal residence. Even if you owe no Montana income tax, the state pays the credit as a refund.
• Inclusive of renters: Renters can claim the credit because Montana assumes 15% of rent represents property taxes passed on by landlords.
• Income-tested: Household income must be below $55,000. Income includes Social Security, pensions, interest, dividends, and certain nontaxable benefits. Medical expenses paid out of pocket reduce income for credit purposes.
• Length of residency: You must reside in Montana for at least 9 months during the claim year and occupy the home for at least 6 months.

Program Overview

The Elderly Homeowner/Renter Credit (Form 2EC) is a cornerstone of Montana’s property tax relief strategy for seniors. Established to counter rising housing costs in both urban centers like Missoula and rural counties impacted by tourism, the credit mitigates the share of income spent on property taxes or rent. The credit amount is calculated using a formula that considers household income and the amount of property taxes or rent-equivalent taxes paid. Lower incomes and higher housing costs result in larger refunds, up to $1,150.

The credit is especially helpful because it is refundable and not subject to state income tax. It often supplements federal benefits and enables seniors to address necessities like heating fuel, medical bills, and home repairs. Renters benefit significantly, a crucial feature in areas where seniors may have downsized from owned homes to rentals.

Eligibility Requirements

To qualify you must:

1. Be age 62 or older as of December 31 of the claim year.
2. Reside in Montana for nine months or more during the year and occupy the home or rental unit for at least six months. Temporary hospital or nursing home stays count if you intend to return.
3. Have household income below $55,000. Household income includes the applicant, spouse (even if not living together), and any dependents sharing the residence. Income sources include Social Security (including Medicare premiums deducted), pensions, wages, business income, interest, dividends, rental income, and certain nontaxable veterans benefits. You may subtract paid Medicare premiums and supplemental insurance premiums when computing income for Form 2EC.
4. Pay property tax or rent on a principal residence. Homeowners use the actual property tax paid, including special assessments. Renters calculate rent-equivalent tax by taking 15% of gross rent paid, excluding payments to tax-exempt landlords (e.g., government housing).
5. File Form 2EC. Submit the form by April 15, either with your Montana income tax return or standalone if you do not need to file a full return.

Calculating the Credit

Montana uses a multi-step formula:

1. Determine gross household income and subtract allowable medical insurance premiums to arrive at “adjusted household income.”
2. Compute property tax paid (homeowners) or rent-equivalent tax (renters = 15% of rent paid).
3. Use tables in the Form 2EC instructions to find the “income multiplier” and “tax factor” corresponding to your adjusted income and property tax amount.
4. Multiply the tax amount by the factor to calculate the credit, up to $1,150.

For example, a homeowner with $18,000 income and $2,200 property tax may receive around $900. A renter with $15,000 income and $9,600 rent (15% = $1,440 rent-equivalent tax) might receive $700.

Application Process

1. Gather documentation: Collect property tax bills (Forms AB-13 or county statements), mortgage Form 1098, rent receipts or landlord verification, Social Security SSA-1099, pension statements, bank interest forms, and proof of medical insurance premiums.
2. Download Form 2EC. Available on the Montana Department of Revenue website. Read instructions carefully to ensure accurate calculations.
3. Complete income section: Report all household income sources. Deduct Medicare Part B/D premiums, supplemental insurance, and certain long-term care premiums to reduce adjusted income.
4. Calculate property tax or rent-equivalent: Homeowners enter actual taxes paid. Renters multiply total rent by 0.15. Exclude rent paid to relatives unless you have a formal lease and they report the income.
5. Compute credit using tables: Follow worksheets in the instructions to determine the credit amount. Double-check calculations or use the Department’s online calculator if available.
6. File by April 15: Mail Form 2EC with required documentation or submit electronically through the department’s online portal. If filing Form 2, include Form 2EC as a schedule.
7. Track refund: Refunds are typically issued within six to eight weeks. Use the state’s “Where’s My Refund?” service for updates.

Documentation Checklist

• Completed Form 2EC
• Copy of Montana Form 2 (if filing) or federal Form 1040
• Property tax bills or mortgage statements showing taxes paid
• Rent receipts, lease agreements, or landlord certification (Form RENT)
• SSA-1099, 1099-R, W-2, K-1, interest/dividend statements
• Proof of Medicare and supplemental insurance premiums
• Documentation of long-term care premiums (if deducted)
• Proof of Montana residency (utility bills, voter registration) if requested

Strategies for Maximizing the Credit

1. Track medical premiums: Deducting Medicare and supplemental premiums lowers adjusted income, increasing the credit. Keep annual summaries from Social Security and insurers.
2. Pay property taxes before year-end: Ensure taxes are paid by December 31 to count toward that year’s credit. If your county allows semiannual payments, pay both installments before year-end when possible.
3. Maintain rent receipts: Renters should request monthly receipts or maintain bank records. Landlords must certify rent paid; build this into your lease agreement.
4. Coordinate with energy assistance: Pair the credit with the Montana Low Income Energy Assistance Program (LIEAP) and Weatherization Assistance to free up funds for other expenses.
5. Use VITA or AARP Tax-Aide: Volunteers are trained on Form 2EC and can ensure accurate computations, especially for complex income situations.

Example Scenarios

• Homeowner in Helena: Carol, age 74, has $20,000 income and pays $2,400 property tax. After deducting $1,800 in Medicare premiums, her adjusted income is $18,200. She qualifies for an $860 credit, which she applies to winter heating costs.
• Renter in Bozeman: Luis, age 68, pays $1,200 monthly rent. Rent-equivalent tax is $2,160. With $22,000 income and $2,400 in medical premiums, his adjusted income is $19,600. He receives approximately $780, helping offset rising rents in the fast-growing area.
• Widow in rural Ravalli County: Mabel, age 85, earns $13,500 Social Security and pays $1,100 property tax on a modest home. After deducting $1,200 in premiums, she receives a $900 credit, enabling needed roof repairs.

Maintaining Eligibility

• Annual filing: File Form 2EC each year. Income and rent levels change, affecting credit amounts.
• Keep documentation for three years: The Department may request verification. Store receipts and calculations securely.
• Report address changes: If you move within Montana, update your address with the Department of Revenue to ensure timely communication.
• Understand housing transitions: If you transition from homeowner to renter mid-year, track both taxes and rent to maximize the credit for months eligible.

Additional Resources

• Montana Elderly Homeowner/Renter Credit
• AARP Tax-Aide and VITA sites statewide
• Montana Legal Services Association for assistance with landlord documentation issues
• Area Agencies on Aging for benefits counseling

Key Takeaways

The Montana Elderly Homeowner/Renter Credit is a powerful tool for seniors facing high housing costs. By carefully documenting income, taxes, and rent, and filing Form 2EC annually, you can secure a meaningful refund that strengthens your ability to remain in your home or rental despite rising expenses.