Montana, like a lot of states, starts with income reported on your federal tax return and Montana tax is calculated on that income on Montana Form 2. Your Montana income and the percentage of the tax shown on Form 2 is then determined on Schedule IV – Nonresident/Part-Year Resident Tax. So the income you are seeing is the Form 2 income which is prior to the calculations to determine your Montana tax. Using your example, you are paying a percentage of the Montana tax that would be owed on income of X. That percentage is Z/X.
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