Does Montana Tax Social Security? Rates and Age 65 Subtraction

Yes, Montana does tax Social Security benefits, and it taxes them to the same extent the federal government does. Starting with the 2024 tax year, Montana begins with your federal taxable income, and whatever portion of your Social Security is taxable on your federal Form 1040 flows straight onto your Montana return with no separate state worksheet, threshold, or deduction. Montana is one of only eight states that tax these benefits at all.

How Much of Your Social Security Montana Actually Taxes

Under current law, Montana defines “Montana taxable income” as federal taxable income adjusted only by specific additions and subtractions listed in state law, and Social Security is not among the listed subtractions.¹ The Montana Department of Revenue states that taxable Social Security income “is included in Montana taxable income to the extent that [it is] included in federal taxable income.”²

Since the state number matches the federal number, the federal formula controls. The IRS uses “provisional income,” which equals your adjusted gross income plus any tax-exempt interest plus half of your total Social Security benefits for the year.³ That figure is then compared against the thresholds in 26 USC 86:⁴

If provisional income stays below $25,000 (single) or $32,000 (married filing jointly), none of your Social Security is taxable at either the federal or Montana level.
Between $25,000 and $34,000 (single) or $32,000 and $44,000 (married filing jointly), up to 50% of your benefits become taxable.
Above $34,000 (single) or $44,000 (married filing jointly), up to 85% of benefits can be taxed. That 85% is the ceiling no matter how high your income climbs.

Congress set these thresholds in 1993 and has never indexed them to inflation, so cost-of-living adjustments push more retirees into the taxable range each year.

A Worked Example

Say you’re a single Montana resident with $24,000 in Social Security, a $20,000 pension, and $1,000 in bank interest. Provisional income is $20,000 + $1,000 + $12,000 (half the benefits) = $33,000. That falls in the middle tier, so up to 50% of your benefits could be federally taxable. Line 6b of your Form 1040 might show roughly $4,000 to $4,500. That same figure lands in your Montana taxable income with no further adjustment.

The Tax Rates That Apply

Once your taxable Social Security is in your Montana taxable income, it’s taxed at the same rates as any other dollar. For 2026 Montana uses two brackets:⁵

4.7% on taxable income up to $47,500 (single), $71,250 (head of household), or $95,000 (married filing jointly)
5.65% on taxable income above those thresholds

Montana uses the federal standard deduction amount, which reduces taxable income before rates apply. If you itemize, you must add back any state income tax deduction claimed on the federal return.

The Age 65 Subtraction That Lowers the Bill

Montana offers one subtraction that specifically helps retirees. Taxpayers age 65 and older can subtract $5,660 from federal taxable income on the 2026 Montana return, and the amount doubles if both spouses on a joint return are 65 or older.⁶ The base amount was $5,500 when the Tax Simplification Act took effect and is adjusted annually for inflation.²

The subtraction applies to all taxable income, not just Social Security, but because it lowers overall Montana taxable income it indirectly reduces the tax on your benefits. For a single retiree whose only taxable income is Social Security, $5,660 can wipe out a meaningful share of what Montana would otherwise collect.

Railroad Retirement Is Different

If any of what looks like “Social Security” on your paperwork is actually Tier I or Tier II Railroad Retirement from the Railroad Retirement Board, none of it is taxable in Montana. You subtract those benefits from federal taxable income when filing your Montana return.⁶

Withholding and Estimated Payments

Retirees who don’t have enough tax withheld from pensions or Social Security may need to make quarterly estimated payments. Montana requires them if your combined tax liability after credits and withholding will be $500 or more for the year, with quarterly due dates of April 15, June 15, September 15, and January 15.⁷

You avoid the underpayment penalty by paying at least 90% of your current-year tax liability or 100% of your prior-year liability, whichever is smaller. Montana also carves out a break for the year you retire: if you retire at age 62 or older, estimated payments are not required during your retirement year or the following year.⁷ After that, set up withholding or begin quarterly payments. Taxable Social Security is reported on Montana Form 2 using the same figure that appears on line 6b of your federal 1040.⁸

1
Montana State Legislature. Montana Code 15-30-2101 – Definitions
2
Montana Department of Revenue. Montana Tax Simplification Resource Hub
3
IRS. Publication 915 – Social Security and Equivalent Railroad Retirement Benefits
4
Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
5
Montana Department of Revenue. Updated Wage Withholding Tables and MW-4 Now Available
6
Montana Department of Revenue. 2026 Montana Publication 1
7
Montana State Legislature. Montana Code 15-30-2512 – Estimated Tax, Payment, Exceptions, Interest
8
Montana Department of Revenue. 2025 Montana Individual Income Tax Return Form 2 Instructions