Yes, Montana has a state income tax. It uses two rates on ordinary income: 4.7% up to a threshold that depends on your filing status, and 5.9% on anything above it. Montana also has no general sales tax, so the income tax does most of the work funding state services.
The 2025 Rates and Brackets
For the 2025 tax year, the breakpoint where the 5.9% rate kicks in depends on how you file:
- Single or married filing separately: 4.7% on the first $21,100 of taxable income; 5.9% above that.
- Head of household: 4.7% on the first $31,700; 5.9% above.
- Married filing jointly or qualifying surviving spouse: 4.7% on the first $42,200; 5.9% above.
The thresholds are indexed to inflation and adjusted each year. They apply to ordinary taxable income; long-term capital gains run on a separate rate schedule.1Montana Department of Revenue. 2025 Montana Tax Tables and Deductions
A quick example: a single filer with $30,000 of ordinary taxable income owes 4.7% on the first $21,100 ($991.70), plus 5.9% on the remaining $8,900 ($525.10), for roughly $1,517 before any credits.
Who Owes Montana Income Tax
What you owe depends on your residency status. Montana looks at domicile and whether you maintain a permanent place of abode in the state, considering all the facts and circumstances.2Cornell Law School. Mont. Admin. r. 42.15.109 – Residency
- Residents pay Montana tax on all income, wherever it’s earned.
- Non-residents pay only on Montana-source income: wages for work done in Montana, income from a Montana business, rent from Montana property, gain on Montana real estate.
- Part-year residents pay on everything earned while they were a resident, plus any Montana-source income from the non-resident portion of the year.
If you live in Montana and commute to North Dakota (or the reverse), the two states have a reciprocal agreement. Your employer withholds only your home state’s tax on those wages, and you don’t file a non-resident return in the work state. Montana law limits these agreements to contiguous states, and North Dakota is currently the only active one. If you work in any other state, standard non-resident rules apply there.
Long-Term Capital Gains Get a Lower Rate
Net long-term capital gains are taxed separately at 3.0% and 4.1% for 2025, with the same bracket thresholds as ordinary income: $21,100, $31,700, or $42,200 depending on filing status.1Montana Department of Revenue. 2025 Montana Tax Tables and Deductions
Ordinary income fills the lower bracket first. If your ordinary income already uses up the lower bracket, every dollar of capital gain is taxed at 4.1%. If there’s room left in the lower bracket after ordinary income, that room gets the 3.0% rate and anything above it jumps to 4.1%. In practice the discount helps lower-income filers more than high earners.
How Retirement Income Is Taxed
Montana starts its calculation with your federal taxable income. That means most retirement income taxable federally is also taxable in Montana: pensions, 401(k) and traditional IRA withdrawals, and annuity distributions. There’s no broad state exclusion for retirement income.
Social Security works the same way. Whatever share of your benefits is included in federal taxable income flows through to the Montana return. If 85% of your benefits are federally taxable, Montana taxes that 85% too. The state doesn’t layer a separate exclusion on top.
There is a narrow carve-out for working military retirees. Those who meet the eligibility rules can exempt up to 50% of their military retirement pay from Montana taxable income, capped at their Montana-source earned income. Military survivor beneficiaries can also exempt up to 50%. The exemption runs for five consecutive years after eligibility and expires entirely in tax year 2033.3Montana Department of Revenue. Working Military Retirement Exemption
Deductions and Credits That Reduce the Bill
Because Montana begins with federal taxable income, the federal standard deduction is already baked in. You don’t make a separate state standard deduction election.4Montana Department of Revenue. Montana Tax Simplification Resource Hub
If you’re 65 or older, you can subtract $5,660 on your 2026 Montana return. If both spouses on a joint return qualify, the subtraction doubles. The amount is adjusted for inflation each year.5Montana Department of Revenue. 2026 Montana Publication 1
Montana’s Earned Income Tax Credit is 10% of your federal EITC and is refundable, so it can produce a payment if it exceeds your tax.6Montana Department of Revenue. Montana Earned Income Tax Credit An Elderly Homeowner/Renter Credit is also available for qualifying taxpayers.
Filing Your Montana Return
You need to file a Montana individual return if you were a resident, part-year resident, or non-resident with Montana-source income and had a federal filing requirement. You also need to file if you had no federal filing requirement but a Montana addition or subtraction creates a state liability. The main form is Form 2, the Montana Individual Income Tax Return.7Montana Department of Revenue. Individual Income Tax
The annual deadline is April 15, moving to the next business day when it falls on a weekend or holiday. You can file electronically through approved software, a tax professional, or the Department of Revenue’s website. Paper returns go in by mail.
Montana grants an automatic six-month extension to file. You don’t request it. One trap catches people every year: the extension covers only the paperwork, not the payment. Any tax you owe is still due April 15, and penalties and interest start running the next day on anything unpaid.8Montana State Legislature. Montana Code 15-30-2604 – Time for Filing, Extensions of Time
Paying Through Withholding or Estimated Payments
If you’re a wage employee, your Montana tax usually comes out of each paycheck and your employer sends it to the state. If you have income that isn’t subject to withholding (self-employment earnings, rental income, significant investment income), you’ll likely owe quarterly estimated payments.
The four installment dates are April 15, June 15, September 15, and January 15 of the following year.9Montana State Legislature. Montana Code 15-30-2512 – Estimated Tax, Payment, Exceptions, Interest Any balance left after withholding and estimates is due with your return. Starting January 1, 2026, any single tax payment of $50,000 or more must be made electronically.3Montana Department of Revenue. Working Military Retirement Exemption
What Happens If You’re Late
Montana charges separate penalties for filing late and paying late, and they can run at the same time:
- Late filing: 5% of the unpaid tax per month, $50 minimum, capped at 25% of the tax due.
- Late payment: 0.5% of the unpaid balance per month, capped at 12% of the tax due.
Interest also accrues on unpaid individual income tax at a rate tied to the federal underpayment rate under Internal Revenue Code Section 6621, based on the third quarter of the preceding year.10Montana Department of Revenue. Interest and Penalties A taxpayer who both files and pays late is hit by all three at once. If you can’t pay the full balance by April 15, file the return anyway. That alone eliminates the biggest of the three charges.