MONTANA
Return to Retiree Tax Map
NICKNAME
The Treasure State
BOTTOM LINE: NOT TAX-FRIENDLY
Montana is one of five states that do not impose a general sales tax. That's the good news. The bad news is that it taxes most forms of retirement income, except Railroad Retirement benefits. The state allows a pension- and annuity-income exemption of up to $3,760 per person, subject to certain income limitations. Residents 65 and older can exclude up to $1,600 of interest income from state taxes.
STATE SALES TAX
No general sales tax. There’s a 3% tax on accommodations and campgrounds and a 4% tax on rental vehicles.
INCOME-TAX RANGE
Low: 1% (on up to $2,700 of taxable income)
High: 6.9% (on taxable income over $16,000)
SOCIAL SECURITY
Social Security benefits are taxable. The taxable amount may be different from the federally taxable amount because Montana taxes some types of income that the federal government does not, and vice versa.
EXEMPTIONS FOR OTHER RETIREMENT INCOME
Montana taxes all pension and retirement income received while residing in Montana to the extent that it is taxable on the federal return. Tier I and Tier II Railroad Retirement benefits are 100% exempt from Montana income tax. The state allows a pension and annuity income exemption of up to $3,760 per individual, if certain income limitations are met. Early distributions from an IRA do not qualify for this exemption. Residents 65 and older can exclude up to $1,600 of interest income from state taxes.
PROPERTY TAXES
Property, which is subject to state and local taxes, is assessed at 100% of its market value. Residential property owners qualify for a homestead exemption of 44% of market value, so the tax bill is based on 56% of a property’s market value. The state establishes the tax rate to determine the taxable value, while local taxing units establish the tax rates to determine the property tax amount.
Tax breaks for seniors: Any homeowner or renter 62 or older can apply for a refundable income-tax credit worth up to $1,000 if they have lived in Montana for nine months, occupied a residence for six months and have a gross household income of less than $45,000.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax and no estate tax.
Visit RetirementLiving.com for a complete rundown of taxes in Montana.
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