Montana Income Tax Guide 2026 | No Sales Tax, 5.65% Top Rate & Calculator

Montana taxes ordinary income in just two brackets. The top marginal rate was cut from 6.75% to 5.9% for 2024 (Senate Bill 399 of 2021 and Senate Bill 121 of 2023, per the Department of Revenue), and House Bill 337 (2025) lowered it again, to 5.65% for tax year 2026, while raising the 4.7% bracket to $47,500 for single filers ($95,000 joint). For 2027 the rates become 4.7% up to $65,000 and 5.4% above.

What makes Montana particularly distinctive among Mountain West states is its combination of policies: no state sales tax (one of only five states nationally), separate lower rates on long-term capital gains (3.0% and 4.1%), and a return that starts from federal figures — including the federal standard deduction, with no separate Montana standard deduction or personal exemption. At $100,000 income, a Montana single filer pays approximately $4,289 in state tax — an effective rate of 4.29%. This guide covers the 2026 bracket structure, the capital gains rates, Social Security treatment, property taxes, and how Montana compares to its neighbors Idaho and Wyoming.

The 2021 SB 399 Reform — From Seven Brackets to Two

Montana's income tax was reformed in stages. Senate Bill 399 (2021) began cutting the top marginal rate, from 6.75% to 6.5% beginning with tax year 2024, and Senate Bill 121 (2023) cut it further, from 6.5% to 5.9% (Montana Department of Revenue, 2024 Form 2 instructions). Ordinary income is taxed in just two brackets, and the bracket amounts and the top rate have changed each year:

The 2026 and 2027 rows come from House Bill 337 (2025), which lowered the top rate and widened the brackets. Joint filers and surviving spouses use double the single amounts ($95,000 in 2026, $130,000 in 2027) and heads of household use $71,250 in 2026 and $97,500 in 2027. The Montana statute that sets the 2026 rates is scheduled to be replaced by the 2027 version on January 1, 2027.

Montana joins a growing list of states that simplified their income tax structures in the early 2020s, alongside Louisiana (flat 3% from 2025) and several others that moved toward flatter systems during the post-pandemic fiscal surplus era.

Montana Income Tax Brackets 2026 — Worked Example at $100,000

Montana's 2026 income tax system starts with federal adjusted gross income (AGI), then applies the same standard or itemized deduction taken on the federal return before Montana-specific adjustments arrive at Montana taxable income. Montana has no separate standard deduction and no personal exemption.

Deductions for a single filer:

• Federal standard deduction: $16,100 (2026)
• Personal exemption: none
• Age 65+ subtraction: $5,660 per person (2025 amount; the 2026 amount is published by November 1, 2026)

Worked example at $100,000 gross income (single, under 65, wages only):

Additional income levels (single filer, 2026, wages only):

Married filing jointly filers use the $32,200 federal standard deduction and the $95,000 bracket amount.

No State Sales Tax — What It Means in Practice

Montana is one of only five US states with no state sales tax, alongside Alaska, Delaware, New Hampshire, and Oregon. For Montana residents — particularly those in rural areas, near state borders, or with high annual consumer spending — this absence creates tangible savings.

A Montana household spending $45,000/year on taxable goods would pay roughly $3,375 in sales tax if subject to the US average combined rate of ~7.5%. Montana residents pay $0. This savings substantially offsets Montana's income tax burden for middle-income earners.

The no-sales-tax policy has additional effects specific to Montana's geography and economy:

• Border tourism: Residents of neighboring Idaho (state sales tax ~6%), Wyoming (no income tax but ~5.4% combined), and the Dakotas regularly cross into Montana for major purchases. This border commerce dynamic is well-established for Montana retailers near state lines.
• Rural households: In rural Montana, where incomes are often lower and a higher proportion of household spending goes to large tangible goods (vehicles, farm equipment, appliances), the absence of sales tax delivers proportionally larger benefits.
• Property tax offset: Because Montana has no sales tax, property taxes carry more of the local government revenue burden (~0.61% effective rate). This is a deliberate structural trade-off — the state raises revenue through income and property taxes rather than transactions.

Among Mountain West states, Montana avoids the sales tax, while Wyoming and Nevada avoid the income tax; Idaho, Colorado, Utah, Arizona and New Mexico levy both.

Capital Gains — Montana's Two Rates

Montana taxes net long-term capital gains under a separate two-rate schedule rather than the ordinary income brackets: 3.0% on the first slice of gains and 4.1% above it.

The 3.0% slice is the 4.7%-bracket amount for your filing status less your other (ordinary) taxable income; for 2026 that amount is $47,500 for single filers ($95,000 joint, $71,250 head of household). Once ordinary taxable income reaches that amount, all net long-term gains are taxed at 4.1%. Short-term gains are ordinary income taxed at 4.7% or 5.65%.

2026 examples (single filer, $50,000 of net long-term gains):

For most investors with a substantial gain, the effective Montana rate on long-term gains is therefore 4.1%, compared with 5.65% on ordinary income above $47,500. Capital losses reduce the net gain on which these rates are calculated.

Social Security Income — Follows Federal Rules

Montana's treatment of Social Security income tracks the federal approach closely: Montana taxes Social Security income to the same extent it is taxable at the federal level. Montana provides no additional state-level exemption beyond what federal law already permits.

Under federal rules, the taxable portion of Social Security depends on combined income (AGI + non-taxable interest + half of Social Security benefits):

• Below $25,000 (single) / $32,000 (MFJ): Social Security is 0% taxable
• $25,000–$34,000 (single) / $32,000–$44,000 (MFJ): up to 50% of benefits taxable
• Above $34,000 (single) / $44,000 (MFJ): up to 85% of benefits taxable

Montana applies the same thresholds and percentages. A single retiree with $20,000 Social Security and $15,000 in pension income ($35,000 total) would have a combined income of approximately $25,000, resulting in about $0–50% of Social Security taxable federally — and Montana follows that same calculation.

This differs from fully tax-exempt states (like Louisiana for Social Security) and fully taxing states. Montana sits in the middle group: following federal inclusion rules means many moderate-income retirees pay little or no Montana tax on Social Security, while higher-income retirees who already have 85% inclusion federally pay Montana tax on that same 85% figure.

For retirees with total income well above $34,000 (single), essentially 85% of Social Security is subject to Montana's 5.65% top rate (2026) — something to model carefully when comparing Montana to neighboring Idaho (which partially exempts Social Security) or Wyoming (no income tax at all).

Property Tax in Montana — Moderate Rates, No Sales Tax Trade-Off

Montana's effective property tax rate averages approximately 0.61% — moderate by national standards and notably lower than high-property-tax states like New Jersey (~1.88%) or Illinois (~1.88%), but higher than low-rate states like Louisiana (~0.55%) or Alabama (~0.40%).

On a $350,000 home in Montana, the annual property tax bill would be approximately $2,135. On a $500,000 home (more representative of resort areas like Bozeman or Whitefish), the bill would be approximately $3,050.

Montana-specific property tax context:

• No sales tax offset: Because Montana collects no sales tax, property taxes shoulder a larger share of local government revenue. This is by design — Montana's fiscal structure relies more heavily on property and income taxes.
• Resort and tourism pressure: Real estate values in Bozeman, Missoula, and resort corridors have increased sharply in recent years, pushing effective property tax bills higher even at modest percentage rates.
• Agricultural land: Montana taxes agricultural land at a fraction of its market value — a significant benefit for the state's farming and ranching community.
• Homestead exemption: Montana does not offer a broad homestead exemption comparable to Florida or Louisiana, but it does provide property tax assistance programs for low-income and elderly residents.

The combination of no sales tax and a moderate property tax rate of ~0.61% means Montana's total state and local tax burden is broadly competitive — though the income tax at 5.65% for higher earners (2026) is higher than several competing relocation destinations.

Montana vs Idaho and Wyoming — Mountain West Comparison

Montana residents and relocation candidates most commonly compare Montana's tax environment to Idaho (immediate neighbor to the west) and Wyoming (neighbor to the south/southeast). The three states represent meaningfully different tax philosophies.

At $100,000 income (single filer, approximate 2026):

Key takeaways from this comparison:

• Montana vs Idaho: Montana and Idaho have similar income tax burdens at $100,000, but Idaho levies a ~6% sales tax that Montana does not. For a family spending $50,000/year on taxable goods, Idaho's sales tax adds ~$3,000 — narrowing and potentially reversing Idaho's income tax advantage. Idaho exempts Social Security and has a slightly lower property tax rate.
• Montana vs Wyoming: Wyoming's zero income tax is a major advantage at higher incomes. At $200,000, a Wyoming resident saves about $9,900 in income tax over Montana (2026). However, Wyoming levies sales tax (~5.4% combined) and those savings must be weighed against actual lifestyle and business considerations. Wyoming has no income infrastructure for high earners to offset — the state relies on mineral severance taxes and sales tax.
• Unique Montana position: Montana is the only Mountain West state that levies income tax but no sales tax. Idaho, Colorado, Utah, Arizona, and New Mexico levy both. Wyoming and Nevada levy neither (relying on other revenue sources). Montana's position — income tax yes, sales tax no — is genuinely unusual regionally.

Montana as a Retirement Destination — Tax Profile

Montana has become an increasingly popular retirement destination, driven by its natural scenery, outdoor recreation, and — for some income profiles — a reasonably competitive tax environment. Here is the honest tax picture for Montana retirees:

Retirement income sources and Montana tax treatment:

• Social Security: Taxable to the extent taxable federally (up to 85% for higher-income retirees)
• Private pension / 401(k) / IRA withdrawals: Fully taxable at ordinary income rates (4.7%/5.65%)
• Age 65+ subtraction: $5,660 per person for 2025 ($11,320 if both spouses are 65 or older); the 2026 amount is published by November 1, 2026
• Investment income: Taxable as ordinary income, but net long-term capital gains are taxed at 3.0% and 4.1%
• Military retirement: Montana does not offer a blanket military pension exemption; working military retirees can subtract the lesser of 50% of their military retirement income or their Montana-source earned income, and otherwise military retirement pay is generally taxable

Retirement profile: who benefits from Montana?

• Active investors and retirees with significant capital gains: The 3.0% and 4.1% long-term rates are lower than the 5.65% top ordinary rate.
• Lower-income retirees ($40,000–$70,000 total income): The federal standard deduction, the age-65 subtraction and the 4.7% lower bracket result in moderate effective Montana tax rates.
• Higher-income retirees ($150,000+): The 5.65% top rate (2026) on pensions and IRA withdrawals becomes significant. Wyoming (no income tax) and Idaho (similar rate, fully exempt Social Security) are worth comparing carefully at these income levels.

Montana's no-sales-tax environment is a genuine lifestyle benefit — groceries, vehicles, appliances, clothing, and most consumer purchases are free of state sales tax, which is particularly valuable for retirees managing fixed budgets and living outside major metropolitan areas where everyday spending is often higher.