State Income Tax

Income Tax in Montana: Complete Guide 2026

Updated 2026-03-11

Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.

Income Tax in Montana: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.

Montana is one of five states with no general sales tax, making income tax the state’s primary revenue source. For 2026, Montana imposes a graduated individual income tax with two brackets following recent tax reform: a lower rate of approximately ~4.7% on the first ~$20,500 of taxable income and a top rate of approximately ~5.9% on income above that threshold. This simplified two-bracket system replaced the previous seven-bracket structure that had a top rate of ~6.75%. Montana’s combination of no sales tax and moderate income tax rates makes the state distinctive in the mountain West.

Montana Income Tax Rates (2026)

All Filing Statuses

Taxable Income BracketMarginal Rate
$0 to ~$20,500~4.7%
Over ~$20,500~5.9%

Montana does not differentiate brackets by filing status. The same thresholds and rates apply to single, married filing jointly, married filing separately, and head of household filers.

How Montana Income Tax Works

Two-Bracket System

Montana’s 2023 tax reform consolidated seven brackets into two and reduced the top rate from ~6.75% to ~5.9%. The reform also increased the standard deduction and eliminated several itemized deduction categories to simplify filing.

Standard Deduction and Exemptions

  • Standard deduction: ~$5,540 for single filers; ~$11,080 for married filing jointly (amounts are indexed for inflation)
  • Personal exemption: ~$3,000 per person (Montana-specific, not tied to federal exemption)
  • Itemized deductions: Montana allows itemized deductions but limits them to medical expenses, charitable contributions, and a portion of student loan interest. The state does not allow deductions for state and local taxes, mortgage interest, or certain other federal Schedule A categories.

Key Exclusions and Adjustments

  • Social Security: Not taxed by Montana
  • Pension income: Generally taxable, though there is a partial exemption for filers with qualifying pension income
  • Capital gains credit: Montana offers a ~2% credit on net capital gains from the sale of qualifying Montana property
  • Interest from U.S. government obligations: Exempt from Montana income tax
  • Military retirement: Partially exempt under the pension exclusion provisions

Tax Credits

  1. Elderly homeowner/renter credit: For residents 62+ with household income below ~$45,000, providing relief for property taxes or rent constituting taxes
  2. Dependent care credit: Based on a percentage of the federal credit
  3. Mineral royalty tax credit: For qualifying mineral royalty income
  4. Capital gains credit: ~2% of net capital gains from qualifying Montana assets
  5. College contribution credit: ~10% of contributions to a Montana 529 plan, up to ~$500 credit

Who Must File in Montana

Filing is required if:

  • You are a Montana resident with gross income exceeding the sum of the standard deduction and personal exemption (approximately ~$8,540 for single filers)
  • You are a part-year resident or nonresident with Montana-source income
  • You want to claim refundable credits

Montana uses Form 2 for all individual filers. The filing deadline is April 15.

Comparison to National Average

StateTop Income Tax RateSales TaxStructure
Montana~5.9%0%Graduated (2 brackets)
Idaho~5.695%~6.0%Flat
Wyoming~0%~4.0%No income tax
Oregon~9.9%0%Graduated
National average~4.60%~5.0%Varies

Montana’s income tax rate is above the national average, but the absence of a sales tax reduces the overall tax burden significantly. Compared to Oregon, the other no-sales-tax state in the region, Montana’s income tax rate is substantially lower.

Tips for Minimizing Montana Income Tax

  1. Claim the capital gains credit. If you sell qualifying Montana property (held for at least 12 months and owned since before 2024), you may receive a ~2% credit on net capital gains.

  2. Contribute to a Montana 529 plan. The ~10% credit on contributions up to ~$5,000 per year provides up to ~$500 in direct tax savings.

  3. Apply for the elderly homeowner/renter credit. Residents 62 and older with household income below ~$45,000 can receive property tax or rent relief through this refundable credit.

  4. Maximize retirement contributions. Contributions to tax-deferred retirement accounts reduce your federal AGI, which flows through to your Montana taxable income.

  5. Review the itemized deduction limitations. Montana limits itemized deductions to medical expenses, charitable contributions, and student loan interest. If these exceed the standard deduction, itemize; otherwise, take the standard deduction.

  6. Understand the uniform bracket structure. Since Montana does not adjust brackets for filing status, married couples should compare joint vs. separate filing to determine which produces the lower combined liability.

  7. Take advantage of no sales tax. While not an income tax strategy, Montana’s lack of sales tax means significant purchases made in-state carry no additional tax burden.

Key Takeaways

  • Montana imposes a two-bracket income tax with rates of ~4.7% and ~5.9%, simplified from a prior seven-bracket system
  • The state has no general sales tax, making income tax the dominant revenue source
  • Social Security is fully exempt, and partial pension exclusions are available
  • The capital gains credit provides ~2% on qualifying Montana property sales
  • Montana 529 contributions generate a ~10% credit up to ~$500
  • Itemized deductions are limited to medical, charitable, and student loan interest categories

Next Steps