Montana does have a state income tax
Montana charges a state income tax on wages, salaries, and other earned income. The tax rate ranges from 1% to 6.9% depending on how much you earn, with higher earners paying a larger percentage. Unlike some states that have no income tax at all, Montana residents and anyone working in the state must account for this tax when filing their annual return.
The state also taxes interest, dividends, capital gains, and business income. If you work in Montana or live there, you will owe state income tax unless you fall into a specific exemption category — such as being a member of a federally recognized tribe with income earned on tribal land.
Key Takeaways
- Montana's state income tax ranges from 1% to 6.9% based on your income bracket, with rates increasing as earnings rise.
- You owe Montana income tax on wages, self-employment income, investment income, and retirement distributions unless you may have access to for a tribal exemption.
- Montana has no sales tax, which means you do not pay tax at the register when you buy goods, though some counties charge resort taxes.
- Your employer will withhold state income tax from your paycheck if you work in Montana, but you still file an annual state return to reconcile what was withheld against what you actually owe.
Montana's income tax brackets and rates
Montana uses a progressive tax system, meaning the rate you pay increases with your income. For the 2024 tax year, the brackets are:
| Income Range (Single Filer) | Tax Rate |
|---|---|
| $0 to $3,200 | 1% |
| $3,201 to $8,100 | 2% |
| $8,101 to $11,600 | 3% |
| $11,601 to $15,100 | 4% |
| $15,101 to $19,100 | 5% |
| $19,101 and above | 6.9% |
Married couples filing jointly have different bracket thresholds — each bracket is roughly double the single filer amount. The brackets adjust slightly each year for inflation, so the exact dollar amounts change annually.
You only pay the higher rate on income that falls within that bracket, not on all your income. For example, a single filer earning $20,000 pays 1% on the first $3,200, then 2% on the next $4,900, and so on through the brackets, not 6.9% on the entire amount.
What income is taxed in Montana
Montana taxes most forms of income. Wages and salaries from employment are the most common, but the state also taxes self-employment income, rental income, interest earned on savings accounts and bonds, stock dividends, capital gains from selling investments or property, and distributions from retirement accounts like IRAs and 401(k)s.
Some income is exempt. Social Security benefits are not taxed in Montana. Military retirement pay and certain federal pensions may be partially or fully exempt depending on your age and the type of pension. Tribal members earning income on tribal land may be exempt under federal law, though the rules are complex and depend on the specific tribe and the source of the income.
Montana has no sales tax
While Montana does tax income, it does not have a state sales tax. When you buy groceries, clothing, or other goods at a store, you do not pay a state sales tax at the register. This is one of the few states with that structure — most states have both income tax and sales tax.
Some Montana counties do charge a resort tax, typically 3% to 4%, on lodging and sometimes on restaurant meals in tourist areas. These are local taxes, not state taxes, and explore only in specific counties. If you live in or visit a resort area, you may see this tax on your hotel bill or restaurant receipt.
How withholding works on your paycheck
If you work in Montana, your employer will withhold state income tax from your paycheck based on the W-4 form you complete when hired. The amount withheld depends on your income level, filing status, and the number of dependents you claim. Your employer sends this withheld money to the Montana Department of Revenue on your behalf.
The withholding is an estimate. It may be more or less than what you actually owe when you file your annual return. If too much was withheld, you receive a refund. If too little was withheld, you owe the difference. You can adjust your withholding during the year by submitting a new W-4 to your employer if your circumstances change — such as getting married, having a child, or taking a second job.
Filing your Montana state return
You file your Montana state income tax return using Form 2, the Montana Individual Income Tax Return. The important date is the same as the federal important date, typically April 15 of the following year. You can file by mail or electronically through the Montana Department of Revenue website.
You must file if your income exceeds the filing threshold for your age and filing status. For 2024, a single person under 65 with at least $13,850 in gross income must file. The threshold is higher for married couples and for people 65 and older. Even if you do not meet the threshold, filing may be worth doing if you had taxes withheld — you could receive a refund.
Montana offers a standard deduction that reduces your taxable income. For 2024, the standard deduction is $5,370 for single filers and $10,740 for married couples filing jointly. You can also itemize deductions if they exceed the standard deduction, though fewer people do this since the standard deduction increased in recent years.
Tax credits and deductions available in Montana
Montana offers several tax credits that can reduce what you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is often the largest credit available. Montana also has a property tax credit for homeowners and renters, a dependent and child care credit, and a credit for taxes paid to other states if you worked in more than one state during the year.
Deductions reduce your taxable income before the tax is calculated. In addition to the standard deduction, you can deduct contributions to traditional IRAs, student loan interest up to $2,500, and certain education expenses. Self-employed people can deduct half of their self-employment tax and business expenses related to their work.
Frequently Asked Questions
Do I have to pay Montana income tax if I work remotely for an out-of-state company?
Yes, if you live in Montana and work remotely, you owe Montana income tax on your wages. The state taxes income earned by residents regardless of where the employer is located. If you work for a company in another state but live in Montana, you file a Montana return on that income.
What happens if I move to Montana mid-year?
You owe Montana income tax only on income earned after you become a resident. When you file, you report income from all sources for the full year, but only the portion earned while a Montana resident is subject to Montana tax. You may also owe tax to the state you moved from on income earned there before the move.
Is Montana income tax deductible on my federal return?
Yes, you can deduct state income taxes paid on your federal return, but only if you itemize deductions rather than take the standard deduction. The deduction is capped at $10,000 per year for all state and local taxes combined (income, sales, and property taxes together).
Do I owe Montana tax on retirement income if I move out of state?
No, once you move out of Montana and establish residency elsewhere, you no longer owe Montana income tax on new income. However, if you still own property in Montana or have other Montana-source income, you may owe tax on that specific income. The rules depend on the type of income and your residency status.
Can I file my Montana return electronically?
Yes, the Montana Department of Revenue accepts electronic filing through approved tax software and through authorized e-file providers. Electronic filing is faster than mailing a paper return and typically results in quicker refunds if you are owed one.