(1) The program administrator determines who can be an account owner and from whom it will accept contributions to an account. More information regarding the administration of the program can be found at www.mfesp.com. Account ownership and the acceptance of contributions are not necessarily related to the ability to reduce Montana taxable income. A person is not necessarily entitled to reduce their Montana adjusted gross income because they made a contribution or are an account owner. Entitlement to the tax benefit depends on meeting specific statutory requirements set forth in Title 15, chapter 62, MCA, and these rules.
(2) An individual is allowed to reduce their Montana adjusted gross income by the lesser of the total contributions they actually make to one or more Montana family education savings accounts during the tax year, or $3,000.
(a) Except as provided in (i), (ii), and (iii), a deduction is allowed only for contributions an individual makes to an account owned by the individual (or jointly with their spouse).
(i) Section 15-62-207, MCA, provides that a qualifying contribution can also be made to an account owned by the individual's child or stepchild if that child or stepchild is a Montana resident. The department interprets that provision to allow:
(A) a parent or stepparent to claim a deduction for an amount they contribute to an account owned by their minor child or stepchild as provided in (ii); and
(B) a parent or stepparent to claim a deduction for an amount they contribute to an account owned by their adult child or stepchild as provided in (iii).
(ii) If a parent or stepparent supplies the funds they use to establish an account under the Montana Uniform Transfers to Minors Act for which their minor child or stepchild is both the owner and designated beneficiary, and if the child or stepchild is a Montana resident, the parent or stepparent may elect to reduce their own Montana adjusted gross income by the amount they provided even if for other purposes the transaction would be treated as if they made a gift of cash to the child or stepchild who in turn contributed the money to a family education savings account they own entitling the child or stepchild to reduce the child or stepchild's Montana adjusted gross income.
(iii) If a parent or stepparent contributes funds to an account owned by their adult child or stepchild and if that adult child or stepchild is a Montana resident when the contribution is made, the contributor may claim a deduction for their contribution. It does not matter whether the designated beneficiary of the account is:
(A) the contributor's adult child or step-child;
(B) a grandchild or other relative of the contributor;
(C) related to the account owner; or
(D) a resident or nonresident.
(b) The reduction in Montana adjusted gross income for a contribution can be claimed only for the tax year the contribution is made.
(c) An account owner is not required to be a resident and a nonresident may reduce their Montana adjusted gross income, if any, for their contributions to an account they own. Except as provided in (2)(a), however, contributions to an account, whether by a resident or nonresident, if made to an account they do not own, cannot reduce their own Montana adjusted gross income.
(3) For purposes of the $3,000 reduction to Montana adjusted gross income, contributions must be made to a Montana family education savings account. Contributions made to other state or private family education savings accounts do not qualify for the Montana reduction to income.
(4) A rollover from one account to another or from one 529 plan to another is not a contribution for which a deduction may be claimed.
(5) For Montana tax purposes, deductible contributions to a family education savings account do not include the earnings on the account.