Tool | September 2016

State-by-State Guide to Taxes on Retirees

Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state.


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The Bottom Line
Map of Montana

Least Tax-Friendly

One of Kiplinger's top ten least tax-friendly states for retirees, the Treasure State is one of five states that do not impose a general state sales tax. That's the good news. The bad news is that it taxes most forms of retirement income. The state allows a pension- and annuity-income exemption of up to $3,980 per person, subject to certain income limitations. Residents 65 and older can exclude up to $800 for single filers (up to $1,600 for married filers) of interest income from state taxes.

State Sales Tax

There is no general state sales tax, but you will pay 7% in taxes on accommodations and campgrounds and pay a 4% tax on rental vehicles. Montana allows tourism-dependent local communities such as Big Sky and West Yellowstone to impose a local option sales tax. State law limits the rate to no more than 3%, but the rate and taxable items are both set by local ordinance.

Income Tax Range

Low: 1% (on up to $2,800 of taxable income)

High: 6.9% (on taxable income over $17,000)

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

The state allows a partial pension exemption adjusted for inflation every year. For 2014, the maximum exemption was $3,980 if federal adjusted income was $35,190 or less. If both spouses are receiving retirement income, each spouse can take up to the maximum exemption if the couple falls under the income threshold. Early distributions from an IRA do not qualify for this exemption. Single residents 65 and older can exclude up to $800 of interest income from state taxes, while married joint filers can exclude up to $1,600. Tier II Railroad Retirement benefits are 100% exempt from Montana income tax.


Qualifies for the pension exemption.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for the pension exemption.

Private Pensions

Qualifies for the pension exemption.

Public Pensions

Qualifies for the pension exemption.

Property Taxes

There is a property tax assistance program -- if you are single and your total household income is greater than $21,032, you do not qualify. Households with more than one owner occupant and a total household income greater than $28,043 cannot qualify.

Median property tax on Montana's median home value of $190,100 is $1,630, according to the Tax Foundation.

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 or estate tax.