Yes, Montana does have a state income tax. It’s charged at two rates: 4.7% on taxable income up to a threshold set by your filing status, and 5.9% on anything above that. Montana has no general sales tax, so the income tax carries most of the load for funding state services.
The Two Rates and 2025 Brackets
Montana simplified its income tax in 2024, collapsing a multi-bracket system into just two rates. Those rates haven’t changed since. What does change each year is the dollar amount where the higher rate kicks in, because the threshold is adjusted for inflation and depends on how you file.
For the 2025 tax year:
- Single or married filing separately: 4.7% on the first $21,100 of taxable income; 5.9% above $21,100.
- Head of household: 4.7% on the first $31,700; 5.9% above $31,700.
- Married filing jointly or qualifying surviving spouse: 4.7% on the first $42,200; 5.9% above $42,200.
These thresholds apply to taxable income excluding net long-term capital gains, which are taxed on a separate, lower schedule.1Montana Department of Revenue. 2025 Montana Tax Tables and Deductions
A Worked Example
Take a single filer with $30,000 in ordinary taxable income for 2025. The first $21,100 is taxed at 4.7%, which comes to $991.70. The remaining $8,900 is taxed at 5.9%, which comes to $525.10. Total tax before any credits: about $1,517.
Lower Rates on Long-Term Capital Gains
Montana taxes net long-term capital gains at reduced rates rather than lumping them in with wages and business income. For 2025 the capital gains rates are 3.0% on the lower tier and 4.1% above it, and the bracket threshold matches the ordinary income breakpoint for your filing status: $21,100 single, $31,700 head of household, $42,200 joint.1Montana Department of Revenue. 2025 Montana Tax Tables and Deductions
The mechanics are worth understanding. Your ordinary income fills the lower bracket first. If your ordinary income already exceeds the threshold, all of your capital gains fall into the 4.1% tier. If your ordinary income sits below the threshold, whatever space is left in the lower bracket is taxed at 3.0%, and gains above that space hit 4.1%. The discount ends up meaning more for lower-income taxpayers than high earners.
Who Actually Owes Montana Income Tax
Whether you owe depends on your residency status. Montana determines residency based on domicile or maintaining a permanent place of abode in the state, evaluated in light of all facts and circumstances.2Cornell Law School. Mont. Admin. r. 42.15.109 – Residency
- Residents are taxed on all income regardless of where it’s earned, including wages from out-of-state employers, investment returns, and business income from other states.
- Non-residents are taxed only on income from Montana sources: wages for work performed in Montana, income from a Montana-based business, rent from Montana property, or capital gains from selling Montana real estate.
- Part-year residents are taxed on all income earned during their period of Montana residency, plus any Montana-source income received during the non-resident portion of the year.
Reciprocity With North Dakota
Montana has a reciprocal income tax agreement with North Dakota. If you live in Montana and commute to a job in North Dakota, your employer withholds Montana tax only and you don’t file a North Dakota return on those wages. The same works in reverse for North Dakota residents working in Montana. Montana law limits these agreements to contiguous states, and North Dakota is currently the only state with an active arrangement. If you commute to a job in any other state, this reciprocity does not apply.
Retirement Income and Social Security
Montana’s income tax starts with your federal taxable income. Because of that starting point, most retirement income that’s taxable federally is also taxable in Montana: pension payments, 401(k) and IRA withdrawals, and annuity distributions. There is no broad exclusion for retirement income.
Social Security follows the same logic. Whatever portion of your benefits is included in federal taxable income flows through to your Montana return. If your combined income is high enough that 85% of your Social Security is federally taxable, Montana taxes that same amount. The state doesn’t add its own exclusion on top of the federal rules.
One narrow carve-out exists for military retirees who keep working in Montana. Eligible working military retirees can exempt up to 50% of their military retirement pay from Montana taxable income, or the amount of their Montana-source earned income, whichever is less. Beneficiaries receiving military survivor benefits can also exempt up to 50%. The exemption can be claimed for five consecutive years after eligibility and expires entirely in tax year 2033.3Montana Department of Revenue. Working Military Retirement Exemption
Taxpayers 65 and older can also subtract $5,660 from their federal taxable income on their 2026 Montana return. If both spouses on a joint return qualify by age, the subtraction doubles. The amount is adjusted annually for inflation; it was $5,500 when the simplified system launched in 2024.4Montana Department of Revenue. 2026 Montana Publication 1
Filing and the Extension Trap
You need to file a Montana individual income tax return if you were a resident, part-year resident, or non-resident with Montana-source income and had a federal filing requirement. The primary form is Form 2. The annual deadline is April 15, moving to the next business day when it falls on a weekend or holiday.5Montana Department of Revenue. Individual Income Tax
Montana grants an automatic six-month extension to file, with no separate request required. Here’s what catches people: the extension covers the paperwork only, not the payment. Any tax you owe is still due April 15, and penalty and interest accrue on unpaid balances from that date forward.6Montana State Legislature. Montana Code 15-30-2604 – Time for Filing, Extensions of Time
What It Costs to File or Pay Late
Montana runs two separate penalties, and they stack:
- Late filing penalty: 5% of the unpaid tax for each month your return is overdue, with a $50 minimum, capped at 25% of the tax due.
- Late payment penalty: 0.5% of the unpaid balance per month, capped at 12% of the tax due.
Interest also accrues on unpaid individual income tax at a rate tied to the federal underpayment rate under Internal Revenue Code Section 6621, based on the third quarter of the preceding year.7Montana Department of Revenue. Interest and Penalties All three run at once for a taxpayer who files late and pays late. Filing on time even when you can’t pay in full eliminates the largest of the three.