Montana’s capital gains tax applies preferential rates of 3.0% and 4.1% to long-term gains, both lower than the state’s 4.7% and 5.65% ordinary income rates that apply to short-term gains. Starting with the 2026 tax year, House Bill 337 widened the income brackets, so more of your gains may qualify for the 3.0% rate than in prior years. Whatever Montana takes stacks on top of federal capital gains tax.
How the 3.0% and 4.1% Long-Term Rates Work
Montana does not have a standalone capital gains tax. It folds gains into the individual income tax, starting from your federal adjusted gross income and applying state rates and adjustments. Long-term gains, from assets held more than one year, get their own lower rate schedule.
The rate you pay on long-term gains depends on where your ordinary taxable income (not counting the gains themselves) falls in the bracket structure for your filing status. If ordinary income stays inside the lower bracket, all of your long-term gains are taxed at 3.0%. If ordinary income crosses the threshold, your long-term gains are taxed at 4.1%.1Montana Department of Revenue. HB337: 2026-2027 Montana Individual Income Tax Changes
The 2026 thresholds are:
- Single or married filing separately: $47,500
- Head of household: $71,250
- Married filing jointly or qualifying surviving spouse: $95,000
A concrete example: a single filer with $40,000 in salary and $100,000 in long-term stock gains pays 3.0% on the full $100,000 of gains, because the $40,000 salary sits under the $47,500 threshold. If that same filer earned $60,000 in salary instead, the long-term gains would be taxed at 4.1%. This lookup approach is simpler than the federal method, but it makes your ordinary income the single variable that decides your gains rate.
These brackets are noticeably wider than 2024, when the lower rate reached only $20,500 for single filers and $41,000 for joint filers, and the top ordinary rate was 5.9%.1Montana Department of Revenue. HB337: 2026-2027 Montana Individual Income Tax Changes
Short-Term Gains Get No Break
Gains from assets held one year or less are taxed as ordinary income. For 2026 that means 4.7% on income up to the bracket threshold above, and 5.65% on income beyond it. There is no preferential rate for short-term gains at either the state or federal level.
Federal Capital Gains Tax Stacks on Top
Montana’s rate is only part of what you owe. Federal long-term capital gains rates for 2026 are 0%, 15%, and 20%, with breakpoints tied to taxable income:
- 0% rate: taxable income up to $49,450 (single) or $98,900 (married filing jointly)
- 15% rate: taxable income from $49,450 to $545,500 (single) or $98,900 to $613,700 (married filing jointly)
- 20% rate: taxable income above $545,500 (single) or $613,700 (married filing jointly)
Federal brackets use a stacking method: ordinary income fills the brackets first, and long-term gains stack on top.2Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed
Higher earners may also owe the 3.8% net investment income tax on capital gains when modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). Those thresholds are not indexed for inflation.3Internal Revenue Service. Topic No. 559, Net Investment Income Tax
Put together, a Montana resident in the 15% federal bracket paying the 4.1% state rate faces an effective 19.1% on long-term gains before any NIIT. Someone who qualifies for both the 0% federal rate and Montana’s 3.0% rate pays only 3.0% total.
Selling Your Home
Montana follows the federal Section 121 exclusion for a principal residence. If you owned and lived in the home for at least two of the five years before selling, you can exclude up to $250,000 of gain from income, or $500,000 if married filing jointly. Both spouses must meet the use requirement for the higher joint exclusion.4Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
The exclusion applies on both the federal and Montana returns, and for most home sellers it eliminates capital gains tax entirely. Anything above the exclusion is taxable at both levels.
Like-Kind Exchanges Come With a Montana Catch
Montana generally conforms to federal Section 1031, which lets you defer capital gains when you swap one investment or business property for another of the same type. Montana is among a handful of states with a clawback, though. If you complete a 1031 exchange on Montana property and later sell the replacement property in another state, Montana may still tax the original deferred gain. Investors who acquire Montana real estate through an exchange should factor this in before moving the investment across state lines.
Capital Losses
Starting with the 2024 tax year, Montana treats capital losses the same way the federal government does. Net losses offset gains dollar-for-dollar, and up to $3,000 of excess loss ($1,500 if married filing separately) can be deducted against ordinary income each year. Unused losses carry forward indefinitely.5Montana Department of Revenue. Montana Tax Simplification Resource Hub
If You Don’t Live in Montana
Residency decides which gains Montana can tax. Full-year residents owe Montana tax on all income, including gains from selling assets in other states. Residency turns on domicile or maintaining a permanent home in the state, with things like a Montana driver’s license, vehicle registration, and the address on your financial accounts weighing in.
Non-residents and part-year residents are taxed only on Montana-source income. The clearest case is profit from selling Montana real estate. Gains from selling tangible personal property located in Montana, or from a business interest that primarily operates in Montana, may also count. Gains from intangible assets like stocks and bonds are generally taxed only by the state where you live, not Montana.
Part-year residents get a split calculation: all income received while domiciled in Montana, plus any Montana-source income received after moving away.
Estimated Payments When You Sell Something Big
No employer withholds Montana tax on a capital gain. If you sell a significant asset mid-year, you likely need to make estimated tax payments rather than waiting until you file.
Montana requires estimated payments if you expect to owe more than $500 for the year after withholding and credits.6Montana State Legislature. Montana Code 15-30-2512 – Estimated Tax — Payment — Exceptions — Interest Payments are due April 15, June 15, September 15, and January 15 of the following year. When a due date falls on a weekend or holiday, it moves to the next business day.7Montana Department of Revenue. Making Estimated Tax Payments
To avoid an underpayment penalty, pay at least 100% of your prior year’s Montana liability or 90% of the current year’s, whichever is less.6Montana State Legislature. Montana Code 15-30-2512 – Estimated Tax — Payment — Exceptions — Interest The 100% prior-year safe harbor is usually the easier target when you have an unusually large gain, because you may not know the current year’s liability until the return is done.
What It Costs to Be Late
Montana’s late filing penalty is the greater of $50 or 5% of the unpaid tax for each month the return is overdue, capped at 25% of the tax due.8Montana State Legislature. Montana Code 15-1-216 – Uniform Penalty and Interest Assessments Interest compounds daily on unpaid balances starting from the original due date, and the 2026 rate is 7% annually.9Montana Department of Revenue. Interest and Penalties
The state grants an automatic six-month filing extension to October 15, but that only extends the filing deadline. Interest and penalties still run from the original April due date on anything unpaid.10Montana State Legislature. Montana Code 15-30-2604 – Time for Filing — Extensions of Time If you can’t pay in full, filing on time and paying what you can limits the penalty and shrinks the balance interest compounds against.