Montana Tax Guide 2026

Personal income tax — the 2024 simplification

SB 121 of 2023 (signed by Gov. Gianforte) collapsed Montana from a 7-bracket structure (top 6.75% on income > $19,800) to a 2-bracket structure effective tax year 2024: • 4.7% on first $20,500 (single) / $41,000 (MFJ) • 5.9% above 2026 brackets are indexed (current figures approximately as above; verify with state). Montana adopted federal standard deduction conformity for 2024+: $15,000 single / $30,000 MFJ for 2026. This replaced the prior itemized-or-pre-set standard deduction structure. No state-level QBI add-back — Montana conforms to federal QBI (allows the §199A deduction). No state-level AMT. Social Security: PARTIAL exemption — fully exempt for taxpayers with federal AGI ≤ $25,000 single / $32,000 MFJ; phased above (Mont. Code §15-30-2110). Pension income: $4,640 exclusion per taxpayer (age 65+).

Capital gains rate preference

Mont. Code §15-30-2301 provides a NET LONG-TERM CAPITAL GAINS CREDIT of 3% — effectively reducing the Montana rate on qualifying LTCG by 3 percentage points. For 2026 (top rate 5.9% minus 3% credit = 2.9%): • Long-term gains taxed at 2.9% Montana rate • Short-term gains taxed at full ordinary rate (5.9% top) This makes Montana one of the more LTCG-friendly states for high-bracket earners — comparable to Wisconsin's 30% exclusion or South Carolina's 44% exclusion in effective benefit.

No statewide sales tax — and the resort-area exception

Montana is one of 5 states with no statewide sales tax (Oregon, New Hampshire, Delaware, Alaska, and Montana). Most everyday consumer purchases incur no sales tax. Resort-Area Local Option Tax (Mont. Code §7-6-1501): communities that qualify as 'resort areas' (population < 5,500 and economy dependent on tourism, or designated 'resort communities') can impose up to 3% local sales tax on: • Lodging • Prepared food and beverages (restaurants, alcohol) • Luxury items (loosely defined; varies by ordinance) Resort-area-tax communities (selected): • Whitefish: 3% • Big Sky: 3% (Resort Area District) • West Yellowstone: 3% resort + 4% lodging surcharge • Red Lodge: 3% • Virginia City: 3% • Cooke City / Silver Gate: 3% Groceries and most non-restaurant retail: NEVER taxed (even in resort areas). Montana is uniquely attractive for high-ticket non-restaurant purchases (vehicles, equipment, boats) — no sales tax means no use-tax-evasion problem either; many high-net-worth individuals from neighboring states register vehicles in Montana through LLC structures (Montana LLC license-plate strategy).

Property tax and the recent reform

Statewide average effective ~0.74%. Yellowstone County (Billings): ~0.83%, Missoula: ~0.84%, Gallatin (Bozeman) ~0.65%, Flathead (Kalispell) ~0.69%. Montana uses fractional assessment (Class IV residential): 1.35% of market value for most owner-occupied residences (Mont. Code §15-6-134). HB 231 of 2023 created the Property Tax Rebate program: $500/year refundable rebate for primary residences (qualifies for taxpayers with up to $300k AGI). Renewed in 2024. Property Tax Assistance Program (PTAP): income-tested exemption up to 80% reduction for low/middle-income elderly/disabled. Montana Disabled Veteran Property Tax Relief. 2023 reassessment significantly increased Bozeman/Gallatin values, prompting active legislative debate on assessment caps (Texas/California-style caps proposed but not enacted).

Business considerations

Corporate income tax: 6.75% flat (Mont. Code §15-31-121). Minimum tax $50. LLC fee: $20 annual report (Mont. Code §35-8-208(2)(a)) — one of the lowest in the US. Apportionment: single-sales factor for most industries (post-2017 reform). PTET: Available under SB 554 of 2021 — entity-level election at 5.9% (top individual rate); refundable credit to owners. Unemployment tax: 0.13%–6.3% on $43,000 wage base. No estate, inheritance, or gift tax. The combination of no sales tax + moderate income tax + low LLC fees + property-tax rebate makes Montana attractive for self-employed individuals, particularly those whose income is heavily LTCG (2.9% effective state rate) or whose business has no in-state sales tax exposure.

Worked example: Wyatt Anderson, Bozeman-based outdoor gear company founder (single, 2026 exit)

Wyatt sells his S-corp gear business for $2.5M LTCG (held 8 years). Also W-2 reasonable comp of $145,000 during the year. Owns a $625,000 Bozeman home.

Federal: LTCG at 20% bracket + 3.8% NIIT on portion above MAGI threshold. Possible §1202 QSBS exclusion if qualifying. Montana: W-2 wages: $145,000 LTCG: $2,500,000 Montana AGI: $2,645,000 Less standard deduction: $15,000 Less federal QBI conformity (limited on owner-comp; assume modest): $0 (already taken at federal level) Montana taxable: $2,630,000 Tax on ordinary income (W-2 $145k): $20,500 × 4.7% = $964 $124,500 × 5.9% = $7,346 Subtotal ordinary: $8,310 Tax on LTCG ($2.5M): Top rate 5.9% − 3% credit = 2.9% $2,500,000 × 2.9% = $72,500 Total Montana tax: ~$80,810 For comparison: California on same scenario would generate ~$340,000 state tax. Montana saves Wyatt $259k vs CA on the exit. Montana property tax on $625k Bozeman home @ ~0.65% effective = ~$4,063/yr (before $500 rebate → net $3,563).

Statute references

• Personal income tax 2-bracket (4.7%/5.9%) — Mont. Code §15-30-2103 (SB 121 of 2023)
• Capital gains 3% credit — Mont. Code §15-30-2301
• Social Security partial exemption — Mont. Code §15-30-2110
• Resort-area local-option tax — Mont. Code §7-6-1501
• Class IV residential property assessment (1.35%) — Mont. Code §15-6-134
• Corporate income tax — Mont. Code §15-31-121
• LLC annual report $20 — Mont. Code §35-8-208(2)(a)
• PTET election — Mont. SB 554 of 2021

Related pages

• State Tax Comparison →
• Capital Gains Tax →
• QSBS §1202 →