State-by-State Guide to Taxes on Retirees
Tool | December 2020

Montana State Tax Guide for Retirees

State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees.

Montana

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The Bottom Line
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Tax-Friendly

Sales taxes are at the root of Montana's tax-friendly ranking. The Treasure State is one of five states that don't impose a general state sales tax. That's the good news.

The bad news is that Montana taxes virtually all forms of retirement income, including Social Security. The state allows a pension- and annuity-income exemption, but this tax break is subject to certain income limitations. So, for wealthier retirees, the state's income tax hits hard.

On the property-tax front, rates are modest, on average, and any homeowner or renter 62 or older with total household income of less than $45,000 can apply for a refundable income tax credit worth up to $1,000.

Income Tax Range

Low: 1% (on up to $3,100 of taxable income)

High: 6.9% (on taxable income over $18,800)

Beginning in 2022, the top rate will be 6.75% on taxable income over $17,400.

Beginning in 2024, there will be only two tax rates: 4.7% (on up to $20,500 of taxable income for single filers and $41,000 for married couples filing jointly) and 6.5% (on taxable income over $20,500 for single filers and $41,000 for married couples filing jointly).

Taxation of Social Security Benefits

Social Security benefits are taxable. The method used to calculate the taxable amount for Montana income tax purposes is similar to the method used for federal returns. However, there are important differences. As a result, the Montana taxable amount may be different than the federal taxable amount.

Beginning in 2024, Social Security benefits are taxed by Montana to the same extent they are taxed at the federal level.

Tax Breaks for Other Retirement Income

For 2020, up to $4,370 of income from a retirement plan (including 401(k) plans and IRAs) is exempt for taxpayers with federal adjusted gross income of $38,605 or less ($40,790 or less for joint filers). If married, each spouse can claim the exemption.

In addition, taxpayers age 65 or older can exclude up to $800 ($1,600 for joint filers) of interest income.

Railroad Retirement benefits are also exempt.

Beginning in 2024, the exemptions for retirement plan income and interest income are repealed. Instead, taxpayers age 65 and older will be able to deduct up to $5,500 of any income (adjusted for inflation each year after 2024).

Sales Tax

No state sales tax. Resort areas such as Big Sky, Red Lodge and West Yellowstone have local sales taxes.

Real Property Taxes

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 total household income of less than $45,000. (Beginning in 2022, the maximum credit is $1,150.)

Annual Car Taxes and Fees

An annual vehicle registration tax based on the car's age and value is imposed. Additional local taxes may apply.

Estate and Inheritance Taxes

No estate or inheritance tax.

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