Montana does have a state income tax
Montana collects state income tax on wages, self-employment income, interest, dividends, and other earnings. Unlike some states, Montana does not exempt retirement income or Social Security from taxation — both are taxable at the state level. The tax is progressive, meaning the rate increases as your income rises.
Montana's income tax rates range from 1% on the lowest bracket to 6.9% on the highest, as of the 2024 tax year. These rates apply to both residents and nonresidents who earn income in Montana. The state also taxes capital gains at ordinary income rates, with limited exceptions for long-term gains on certain assets.
Key Takeaways
- Montana taxes all income sources including wages, self-employment, retirement, and Social Security at rates between 1% and 6.9%.
- You file Montana income tax using Form 2, the state's individual income tax return, which is due the same day as your federal return (usually April 15).
- Montana offers a standard deduction that varies by filing status and age, which reduces the income amount subject to tax.
- Nonresidents who work in Montana or earn Montana-source income must file a state return even if they live in a no-income-tax state.
Montana's tax brackets and rates for 2024
Montana uses seven tax brackets. The lowest rate of 1% applies to income up to $3,200 for single filers. Each bracket increases until reaching 6.9% on income over $18,700 for single filers. Married couples filing jointly have higher bracket thresholds — for example, the top rate applies to income over $37,400.
The state adjusts these brackets annually for inflation. Your actual tax owed depends on which bracket your total income falls into, not just the top rate. For example, a single filer with $25,000 in income does not pay 6.9% on all of it — only the portion above $18,700 is taxed at that rate.
Montana also taxes capital gains as ordinary income. Long-term capital gains (assets held over one year) receive no special rate reduction, though there are narrow exceptions for certain agricultural property and timber sales.
Standard deduction and filing requirements
Montana's standard deduction for 2024 is $5,320 for single filers and $10,640 for married couples filing jointly. If you are 65 or older, you receive an additional deduction of $1,330 (single) or $1,060 per spouse (married). These amounts reduce your taxable income before the tax brackets apply.
You must file a Montana return if your income exceeds the standard deduction for your filing status. Even if you do not owe tax, filing may be required to claim refundable credits such as the Montana Earned Income Tax Credit. Nonresidents must file if they earned any Montana-source income during the year, regardless of amount.
Who must file and when
Montana residents must file if their total income exceeds the standard deduction. This includes W-2 wages, self-employment income, rental income, interest, dividends, and retirement distributions. Social Security counts as income for filing purposes, though Montana does not tax it separately — it is included in your total income calculation.
Nonresidents working in Montana or earning income from Montana sources (rental property, business, freelance work) must file Form 2 even if they live in another state. Some nonresidents may also need to file Form 2-NR, the nonresident return, depending on the type and amount of income.
The filing deadline is the same as the federal deadline, typically April 15. If you cannot file by then, you can request an extension, but taxes owed are still due by April 15 — an extension only delays filing the return itself.
Montana tax credits that reduce what you owe
Montana offers several credits that directly reduce your tax bill. The Montana Earned Income Tax Credit is available to low- and moderate-income workers and is refundable, meaning you can receive money back even if you owe no tax. The credit amount depends on your income and filing status.
The state also offers credits for property taxes paid, dependent care expenses, and adoption costs. A Dependent Exemption Credit provides a flat amount per dependent, though the value is modest compared to the federal dependent exemption. Unlike the federal system, Montana does not allow a deduction for dependents — instead, you claim a credit.
Retirees may benefit from a Pension and Annuity Exclusion under certain conditions, though this is limited and has income thresholds. Checking whether you meet the requirements is worth doing, as the exclusion can significantly reduce taxable income if you may have access to.
Self-employment income and estimated taxes
If you are self-employed, you must pay both federal and Montana self-employment tax. Self-employment income is subject to Montana income tax at the same rates as wages. You calculate Montana tax on your net self-employment income (after business expenses) using the same brackets as wage earners.
Self-employed individuals with significant income often need to make quarterly estimated tax payments to both the federal government and Montana. These are due on April 15, June 15, September 15, and January 15. Underpayment can result in penalties and interest, even if you ultimately owe no tax when you file.
Montana allows you to deduct half of your self-employment tax when calculating your adjusted gross income, which reduces your Montana taxable income slightly. You report self-employment income and tax on Schedule C (federal) and on your Montana return.
Nonresidents and part-year residents
A nonresident who works in Montana or owns Montana property must pay tax on Montana-source income only, not on income earned elsewhere. For example, if you live in Wyoming but work in Montana, you owe Montana tax on your Montana wages but not on income from a side business run in Wyoming.
Part-year residents — people who moved to or from Montana during the year — file as residents for the portion of the year they lived in Montana and as nonresidents for the rest. You must allocate income to the correct period and state. Montana Form 2 includes schedules to help calculate this split.
Some states have reciprocal agreements with Montana that may reduce or eliminate tax obligations for residents of those states working in Montana. These agreements are rare and apply only to specific neighboring states and specific situations. Check with the Montana Department of Revenue if you live near the border.
Frequently Asked Questions
Does Montana tax Social Security and retirement income?
Yes. Montana taxes Social Security benefits and all forms of retirement income — pensions, 401(k) distributions, IRA withdrawals — at ordinary income tax rates. There is no special exemption for retirement income as there is in some states. A limited Pension and Annuity Exclusion exists but has strict income limits and does not cover Social Security.
What if I live in a state with no income tax but work in Montana?
You still owe Montana income tax on the wages you earn in Montana. Your home state will not tax you on that income, but Montana will. You file a Montana nonresident return reporting only your Montana-source income. Some states offer credits for taxes paid to other states, so check your home state's rules.
Do I need to file if I made very little money?
If your income is below the standard deduction for your filing status, you are not required to file. However, filing may benefit you if you paid taxes through withholding or if you are may have access to to refundable credits like the Earned Income Tax Credit. The Montana Department of Revenue website has a filing requirement calculator.
When do I pay estimated taxes in Montana?
Quarterly estimated payments are due April 15, June 15, September 15, and January 15. You must pay if you expect to owe $100 or more in Montana tax and do not have enough withheld from other income. Self-employed people and those with investment income often need to pay quarterly to avoid penalties.
Can I deduct federal income tax from my Montana return?
No. Montana does not allow a deduction for federal income tax paid. You can deduct state and local property taxes up to $10,000 on your federal return, but that does not reduce your Montana tax. Montana and federal tax calculations are separate.