Tax in Montana: a complete guide
How could Montana’s state tax system impact your family finances? When it comes to Montana’s state taxes, there’s a lot to understand, from income tax to property tax to sales tax.
Montana income tax
As you probably know, all US citizens and residents must pay federal income tax. But many states impose their own state income tax on top of that; only nine US states choose not to charge residents any income taxes.
Montana charges state income taxes up to a top rate of 6.75%. However, like federal income tax, Montana uses a marginal rate tax system (also known as effective tax). Montana has seven income tax brackets, which apply to all types of filers equally.
| Montana taxable income | State income tax amount |
|---|---|
| $0—$3,100 | 1.00% |
| $3,100—$5,800 | 2.00% |
| $5,800—$8,900 | 3.00% |
| $8,900—$12,000 | 4.00% |
| $12,000—$15,400 | 5.00% |
| $15,400—$19,800 | 6.00% |
| $19,800+ | 6.75% |
These income brackets apply to everyone, whether you’re a single filer, filing jointly as part of a couple or a head of household.
State taxes in Montana don’t apply to your gross income (the total amount before tax) but to your federal adjusted gross income (AGI).
Montana tax exemptions and deductions
Many types of income aren’t taxed in Montana, so you can subtract them from your federal AGI to work out your taxable income. These include Social Security, unemployment compensation, state income tax refunds, interest from federal bonds or notes, some pension income, and active-duty military income.
Further deductions are available for Montanans to lower their tax burden. Single filers are entitled to a minimum standard deduction of $2,140, and joint filers are entitled to $4,280. The maximum standard deduction is $4,830 for single filers and $9,660 for joint filers.
Montana also offers a $2,580 personal exemption, which can be claimed for you, your spouse, and your dependents.
However, even with deductions, Montana’s income tax can feel costly for residents when compared to the 0% income state in neighboring Wyoming.
Montana capital gains tax
Montana charges capital gains tax.
For short-term capital gains tax, Montana imposes the same tax as ordinary income.
According to RSM, the assurance, tax, and consulting company, Montana introduced a number of changes to the state’s long-term capital deduction, effective in the 2024 tax year.
The bill replaces the 30% net long-term capital gain deduction with two separate capital gains tax rates based on income. The tax is 3% on income minus nonqualified income for the following filing statuses: single filers ($20,500), joint filers ($41,000) and head of household filers ($30,750). For all other income, the rate is 4.1%.
The full breakdown of capital gains tax rates can be found here.
In addition to state capital gains tax, you must also pay federal tax, which is broken into short—and long-term rates.
Montana sales tax
Some relief for Montanans: there is no state sales tax on goods and services.
The only exceptions are so-called “sin taxes” that apply to some products like alcohol and cigarettes. A pack of 20 cigarettes has a state excise tax of $1.70.
Montana’s alcohol taxes are as follows:
Montana beer tax is $0.14 per gallon
Montana liquor tax is $9.74 per gallon
Montana wine tax is $1.06 per gallon
Montana property tax
If you’re considering buying property in Big Sky Country, you’ll need to know how much you might be charged in state property taxes each year.
Montana’s property taxes are relatively low, although they vary according to the size and value of the property; the average property tax rate is 0.74%. Compared with the rest of the country, that’s pretty good value. The US average property tax rate is 0.99%, and Montana’s state property taxes are the 31st lowest in the US.
How are Montana’s property taxes calculated?
The tax you must pay is based on your property’s market value, which state assessors appraise every two years. Until 2015, this reappraisal only took place every six years.
If, upon reappraisal, the state assessors determine your home has gone up in value, the increase in taxes happens gradually over the next two years.
Like many other states, the average property tax rate varies in relation to average property value across Montana’s 56 counties. Blaine is the county with the highest average property tax rate at 1.6%, whereas Madison’s average is just 0.52%.
Montana motor tax
More good news for Montana’s motorists: the 0% sales tax extends to the sale of motor vehicles.
The only thing you’ll need to factor in is the gasoline tax in Montana. Regular gas is taxed at $0.33 per gallon, and diesel is taxed at $0.2975 per gallon.
Montana estate tax
Since 2005, there has been no state estate tax in Montana.
If you don’t live in Montana but receive an inheritance from someone who resided in Montana, you need to check the regulations where you live, as you could be liable to pay fees on your inheritance.
Montana retirement tax
Montana’s state taxes paint a mixed picture for seniors.
On one hand, the state’s zero percent sales tax and relatively low rate of property taxes mean seniors can save valuable dollars on everyday expenses. On the other hand, Montana imposes state taxes on most retirement income.
Retirement income – including savings in a 401(k), IRA or other savings account – is viewed as regular income and state taxes apply as they would for any other form of income, as laid out at the beginning of this guide. You can also check out the details of retiring in Montana here.
However, some seniors are entitled to discounts on their tax bill.
As mentioned, Montana taxes apply to federal AGI, not gross income, for some seniors with a lower AGI, deductions and tax credits are available.
Social Security is taxable retirement income in Montana unless your federal AGI falls below a certain threshold. All Social Security income is deductible if you’re a single filer with an AGI less than $25,000 or joint filers with an AGI less than $32,000.
For single filers with an AGI between $25,000 and $34,000 or joint filers with an AGI between $32,000 and $44,000, 50 percent of Social Security is deductible. Anyone earning more than that can only deduct 15 percent of their Social Security.
Montana offers other state tax benefits to elderly residents through the Elderly Homeowner Credit. This is a tax credit offered to property owners over 62. The Elderly Homeowner Credit can give you up to $1,000 off your property tax bill.
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.