If you have claimed the Mortgage Interest Credit on Form 8396 Mortgage Interest Credit on the federal return, your home mortgage interest from Form 1098 Mortgage Interest Statement is reduced on Federal Schedule A (Form 1040) Itemized Deductions by the amount of the credit. The credit is generally 20% of the interest paid on the certified indebtedness.
Per the Montana Department of Revenue, it is part of the general application of 15-30-2131, MCA that ties Montana deductions to those allowed under the federal code. The federal code says you can't deduct the 20% because you used it for the credit, so you can only deduct the 80% on the Montana return (even though there's not a similar state tax credit).
Therefore, the home mortgage interest on line 9 of the Montana Itemized Deductions Schedule will be the amount allowed on line 8a mortgage interest of Federal Schedule A.
If you have further questions we would suggest contacting the Montana Department of Revenue at the MT Call Center: (866) 859-2254.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.