How to fill two state returns without paying more taxes than necessary?
In 2025 I lived in Montana for 4 months and then California for the rest of the year. I've gone through both tax returns on Free Tax USA since I had a job in each state. In total, I made around $40k for the whole year, with 10k from my job in Montana and 30k from my job in California. For both returns, I said I was a part time resident and listed the dates I was in each state. I also added the income I made from each job.
For the Montana return, it says my "Federal Taxable Income for Montana" and "Montana Taxable Income" is $25,000, which I am guessing is calculated by subtracting the Federal Standard Deductions and other Montana deductions ($15,000) from my Federal Adjusted Gross Income ($40,000). Consequently I owe Montana a decent amount of money.
I only made 10,000 in Montana and already paid taxes on that income. I don't think I should pay more since the rest of my income was made in another state where I also paid taxes already.
Is there a way to fill out the Montana form so that it only focuses on the 10k I made?
Best Answer
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Hello SkyPilot! I can see why this is confusing, but what you're experiencing is actually how Montana calculates taxes for part-year residents. Montana uses what's called a "proration method" for part-year residents.
Montana calculates your tax liability based on your total federal taxable income (as if you were a full-year resident), then multiplies that tax by a ratio of your Montana income to your total income. So while you're seeing $25,000 as your taxable income, Montana will only tax you on the portion that relates to your Montana earnings.
The calculation generally looks like this:
1. Calculate tax on total federal taxable income ($40,000 minus standard deduction = $25,000)
2. Multiply that tax by the Montana ratio ($10,000 Montana income ÷ $40,000 total income = 25%)
This means you should only be paying Montana tax on approximately 25% of the calculated tax amount, not on the full $25,000.
If you select the State tab and then State Summary from the drop-down menu you should see the calculations listed. If you continue to have concerns, please contact our customer support team. They would be happy to take a look at your specific account and provide assistance.0
Answers
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JanaA,
Thank you so much for your response! That makes sense, and I see it now reflected in the State summary.
SkyPilot
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