There is no Montana inheritance tax, and the state has no estate tax either. Montana voters repealed the inheritance tax in November 2000, effective for deaths after January 1, 2001, and the separate state estate tax stopped applying to deaths after January 1, 2005.1Montana Department of Revenue. Montana Estate and Inheritance Tax Receiving an inheritance in Montana does not trigger a state tax bill on the assets themselves. Depending on what you inherit, though, federal rules and Montana income tax can still reach parts of what you receive.
What the Repeal Actually Means for You
An inheritance tax is paid by the person receiving assets. An estate tax is paid by the deceased person’s estate before anything gets distributed. Montana imposes neither. You will not write a check to the Montana Department of Revenue because a relative left you money, property, or an account, regardless of your relationship to the person who died or the size of your share.
That is the full state answer. The remaining tax questions all come from federal law or from the type of asset you inherit.
The Federal Estate Tax Threshold
The federal estate tax exemption for 2026 is $15,000,000 per individual, set by the One, Big, Beautiful Bill signed into law on July 4, 2025.2Internal Revenue Service. What’s New – Estate and Gift Tax Only the value above that threshold is subject to federal estate tax, which tops out at 40 percent. For most Montana families, this tax will never apply.
Even when it does, the estate’s executor pays it from estate funds before beneficiaries receive their shares. Married couples can also effectively double the shelter by filing Form 706 after the first spouse’s death to transfer unused exemption to the surviving spouse.3Internal Revenue Service. Instructions for Form 706
Inherited Retirement Accounts
Inherited retirement accounts are where most Montana beneficiaries actually see a tax bill. Distributions from inherited IRAs, 401(k)s, and similar tax-deferred accounts are taxed as ordinary income at both the federal and Montana state level when you withdraw them. The money was never taxed going in, so it gets taxed coming out.
Under the SECURE Act, most non-spouse beneficiaries who inherit a retirement account from someone who died in 2020 or later must empty the entire account within 10 years of the owner’s death.4Internal Revenue Service. Retirement Topics – Beneficiary There is no required annual minimum during those 10 years, but the balance must be zero by the end of year 10. Pulling everything in one year can push you into a much higher tax bracket, so timing the withdrawals matters.
Some beneficiaries are exempt from the 10-year rule and can stretch distributions over their own life expectancy:
- Surviving spouses, who can also roll the account into their own IRA.
- Minor children of the deceased, until they reach majority, at which point the 10-year clock starts.
- Disabled or chronically ill beneficiaries.
- Beneficiaries who are no more than 10 years younger than the deceased account owner.
Those distributions land on your Montana return. For 2026, Montana taxes ordinary income at 4.7 percent on the first $47,500 for single filers (or $95,000 for married filing jointly) and 5.65 percent on amounts above that.5Montana Department of Revenue. HB337 – 2026-2027 Montana Individual Income Tax Changes A large inherited IRA liquidated in a single year can easily push you into the higher bracket.
A related category to know about: income the deceased earned but had not received by the time of death, called “income in respect of a decedent.” This includes unpaid salary, accrued bond interest, and retirement account balances. It keeps its original character and is taxed as ordinary income when it reaches you.6Office of the Law Revision Counsel. 26 U.S. Code 691 – Recipients of Income in Respect of Decedents Unlike most other inherited assets, these items do not get a stepped-up basis.
Selling Inherited Property: Stepped-Up Basis
When you inherit real estate, stock, or similar assets, your cost basis for capital gains purposes is the fair market value on the date the owner died, not what they originally paid.7Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent If a parent bought a house in 1985 for $60,000 and it was worth $400,000 on the date of death, your basis is $400,000. Sell it for $410,000, and you owe capital gains tax on $10,000, not on the $350,000 of appreciation that built up during your parent’s lifetime. Sell shortly after inheriting with no change in value and you may owe nothing.8Internal Revenue Service. Gifts and Inheritances
Montana taxes long-term capital gains at lower rates than ordinary income. For 2026, the rates are 3.0 percent on the first bracket of income and 4.1 percent above it.9Montana State Legislature. Montana Code 15-30-2103 – Rate of Tax – Net Long-Term Capital Gains So even a gain on inherited property faces a relatively modest state bite.
Life Insurance Proceeds
Life insurance death benefits paid to a named beneficiary are generally not included in your gross income and do not get reported on your federal return.10Internal Revenue Service. Life Insurance and Disability Insurance Proceeds Montana follows the same treatment. A $500,000 payout from a parent’s policy is tax-free to you.
Watch two exceptions. If the insurer holds the money for a period and interest accrues before paying out, that interest is taxable. Proceeds from a policy that was transferred to the recipient for valuable consideration before the insured’s death may also face limits on the tax exclusion.
Income the Estate Earns Before Distribution
The estate itself can owe income tax on money it earns between the date of death and the moment assets are fully distributed. If the estate generates $600 or more in gross income during a tax year, the executor must file a federal fiduciary income tax return (Form 1041).11Internal Revenue Service. 2025 Instructions for Form 1041 Montana also requires a state fiduciary return when the estate has Montana-source income.1Montana Department of Revenue. Montana Estate and Inheritance Tax
This comes up more often than people expect. Interest on a bank account, rent from a property, and dividends from a brokerage account all count. The income is taxed either to the estate or passed through to beneficiaries on their individual returns, depending on whether it was distributed during the tax year.
When Probate Can Be Skipped
Not every inheritance requires a full probate case. If the total probate estate, minus any liens, is worth $100,000 or less, beneficiaries can collect personal property using a small estate affidavit instead of opening a court case.12Montana State Legislature. Montana Code 72-3-1101 – Collection of Personal Property by Affidavit For larger or more complex estates, probate still happens, but it is a process for transferring ownership, not a tax. Montana will not tax your inheritance on the way through.