Montana has a state income tax, and it applies to most types of income you earn

Yes, Montana collects a state income tax on wages, self-employment income, investment gains, and other earnings. The tax is separate from federal income tax — you file both Montana Form 2 (the state return) and the federal Form 1040. Montana's state tax rates range from 1% to 6.9% depending on your income level, making it a progressive tax system where higher earners pay a higher percentage.

Montana does not have a sales tax or capital gains tax, which sets it apart from many other states. This means the state relies more heavily on income tax revenue than states that split taxation across multiple types of transactions. If you live or work in Montana, you will owe state income tax on your Montana-source income even if you also work in another state.

Key Takeaways

  • Montana's state income tax rates range from 1% to 6.9% and are based on your total income for the year.
  • You file Montana Form 2 with the Montana Department of Revenue in addition to your federal return, usually by the same April important date.
  • Montana has no state sales tax or capital gains tax, so income tax is the primary way the state funds government services.
  • If you move to or from Montana during the year, you may owe tax to both Montana and your previous state for the months you lived in each.

How Montana's income tax brackets work

Montana uses tax brackets — ranges of income that are taxed at different rates. Your income does not all get taxed at your highest bracket; instead, each portion of your income is taxed at the rate for that bracket. For example, if you are single and earn $50,000, the first portion of your income is taxed at 1%, then the next portion at a higher rate, and so on until you reach the bracket that covers your final dollars earned.

The brackets themselves change each year because Montana adjusts them for inflation. This means the dollar amounts that define each bracket are different in 2024 than they were in 2023. You can find the current year's brackets on the Montana Department of Revenue website or in the instructions that come with Form 2. The brackets also differ depending on your filing status — single, married filing jointly, married filing separately, or head of household — so you need to use the bracket table that matches your situation.

What income is subject to Montana state tax

Montana taxes most types of income: W-2 wages from an employer, self-employment income from a business or freelance work, interest and dividends, rental income, and retirement account withdrawals. If you received income from any of these sources and you lived in Montana for any part of the year, you generally owe Montana tax on that income.

Some income is exempt from Montana tax. Social Security benefits are not taxed by Montana, even though they may be taxed at the federal level. Certain military pensions and some other government pensions also receive preferential treatment under Montana law. If you are unsure whether a specific type of income you received is taxable in Montana, the Montana Department of Revenue website has detailed guidance, or you can contact them directly.

Filing requirements and important date

You must file a Montana return if your income exceeds a certain threshold, which varies by age and filing status. Generally, if you are required to file a federal return, you are also required to file a Montana return. The Montana filing important date is the same as the federal important date — typically April 15 of the following year — and you can request an extension to October 15 if you need more time.

Montana Form 2 is the main return form. You will also need to include schedules for certain types of income, such as Schedule C if you are self-employed or Schedule D if you have capital gains or losses. The Montana Department of Revenue provides all forms and instructions on its website. You can file by mail or electronically through approved tax software or the state's e-file system.

What happens if you move to or from Montana mid-year

If you moved to Montana partway through the year, you owe Montana tax only on the income you earned while you were a resident. You will also owe tax to your previous state on income earned while you lived there. This is called part-year resident status, and you report it on your Montana return by indicating the date you moved into the state.

The opposite applies if you moved out of Montana during the year. You owe Montana tax only on income earned before you left. You will then owe tax to your new state on income earned after you arrived. Some states have reciprocal agreements that prevent you from being taxed twice on the same income, but Montana does not have many of these agreements, so you may need to claim a credit on one return for taxes paid to the other state.

Montana tax credits and deductions

Montana offers several tax credits that can reduce the amount of tax you owe. The Montana Earned Income Tax Credit is available to lower-income workers and is based on the federal credit. Montana also offers credits for property taxes paid, dependent care expenses, and education-related costs. These credits directly reduce your tax bill, which makes them more valuable than deductions.

You can also deduct certain expenses from your income before calculating tax. The standard deduction — a flat amount you can deduct if you do not itemize — varies by filing status and age. If you itemize instead, you can deduct mortgage interest, charitable contributions, and state and local taxes (up to a federal limit). Montana generally follows federal rules for deductions, so if an expense is deductible on your federal return, it is usually deductible in Montana as well.

Frequently Asked Questions

Do I owe Montana tax if I work in Montana but live in another state?

Yes. Montana taxes income earned within the state, regardless of where you live. You will file a Montana part-year or nonresident return and report only the income you earned in Montana. You will also file a return in your home state for income earned there. Some states offer credits to prevent double taxation, so check your home state's rules.

Is Montana Social Security taxed?

No. Montana does not tax Social Security benefits. However, your federal return may require you to include some or all of your Social Security income depending on your total income and filing status. The Montana return treats Social Security as nontaxable income.

What is the important date to file my Montana return?

The important date is April 15 of the year following the tax year, the same as the federal important date. You can request an extension to October 15 by filing Form 4868 with the IRS; Montana will honor the federal extension automatically. If you file late without an extension, you may owe penalties and interest.

Can I file my Montana return electronically?

Yes. You can file through approved tax software, the Montana Department of Revenue's e-file system, or by mail. Electronic filing is faster and reduces errors. The state provides a list of approved software providers on its website.

What if I owe Montana tax but cannot pay by April 15?

File your return on time anyway, even if you cannot pay the full amount. You can set up a payment plan with the Montana Department of Revenue. Penalties and interest will accrue on the unpaid balance, but filing on time reduces the penalties you will owe.