Montana has a state income tax, and it applies to wages, investment income, and business earnings

Montana taxes individual income at rates that range from 2% to 6.9%, depending on how much you earn. The state uses a progressive tax system, meaning higher earners pay a higher percentage. Unlike some states, Montana does not have a flat tax rate — your rate depends on which tax bracket your income falls into.

The Montana Department of Revenue administers the state income tax. You file your Montana return using Form 2, the Montana Individual Income Tax Return, which you submit alongside your federal return. Montana requires you to file if your income exceeds the filing threshold for your filing status, which changes each year based on inflation.

Montana also taxes capital gains, interest, dividends, and other investment income as ordinary income. There is no separate capital gains tax rate. If you receive income from sources outside Montana — such as wages from working in another state — you may owe tax to both Montana and that state, though Montana offers a credit for taxes paid to other states to reduce double taxation.

Key Takeaways

  • Montana's income tax rates range from 2% to 6.9% across seven tax brackets, with higher earners paying higher percentages.
  • You file Montana income tax using Form 2, which you submit to the Montana Department of Revenue along with your federal return.
  • Montana taxes all types of income the same way: wages, self-employment earnings, investment income, and retirement distributions are all taxed at your ordinary rate.
  • If you work in multiple states or moved during the year, Montana offers a credit for taxes paid to other states to prevent paying tax twice on the same income.

Montana's Tax Brackets and Rates for the Current Year

Montana divides taxable income into seven brackets. The rate you pay depends on your total taxable income after deductions. For single filers in 2024, the brackets begin at 2% on income up to $3,400, then increase at each threshold, reaching 6.9% on income over $18,700. Married couples filing jointly have higher income thresholds before entering each bracket.

The exact dollar amounts for each bracket adjust annually for inflation. You can find the current year's brackets on the Montana Department of Revenue website or in the instructions that come with Form 2. Because Montana uses a progressive system, only the income within each bracket is taxed at that bracket's rate — you do not pay the highest rate on all your income.

Montana also allows you to reduce your taxable income through deductions. You can choose the standard deduction, which varies by filing status and age, or itemize deductions if they exceed the standard amount. Some income sources, such as certain retirement account distributions, may be partially or fully excluded from Montana taxation.

Who Must File a Montana Income Tax Return

You must file a Montana return if your gross income exceeds the filing threshold for your filing status. The threshold changes each year. For 2024, single filers generally must file if their income is above $13,850, and married couples filing jointly must file if their combined income exceeds $27,700. These amounts increase slightly each year.

Even if your income is below the threshold, you should file if Montana withheld taxes from your paychecks during the year. Filing allows you to claim a refund of any overpayment. Additionally, if you are self-employed, you may need to file to pay self-employment tax and income tax, regardless of your income level.

Montana residents who work in other states or who moved to or from Montana during the year have different filing rules. If you lived in Montana for only part of the year, you file a part-year resident return. If you worked in another state, you may need to file returns in both states.

Montana Income Tax Withholding and Estimated Payments

If you receive a paycheck from a Montana employer, your employer withholds Montana income tax based on the W-4 form you complete. The withholding amount depends on your income, filing status, and the number of dependents you claim. You can adjust your withholding at any time by submitting a new W-4 to your employer.

If you are self-employed, a contractor, or receive income that is not subject to withholding, you may need to make quarterly estimated tax payments to Montana. These payments are due on the 15th of April, June, September, and January. If you do not pay enough through withholding or estimated payments, you may owe a penalty when you file your return.

You can check whether you are having enough tax withheld by using the Montana Department of Revenue's withholding calculator, available on their website. This tool helps you estimate your annual tax liability and determine if your current withholding is on track.

Deductions and Credits Available to Montana Taxpayers

Montana offers both deductions that reduce your taxable income and credits that reduce the tax you owe. The standard deduction is the simplest option for most filers — you subtract this amount from your gross income, and the remainder is taxed. For 2024, the standard deduction for single filers is $13,850, and for married couples filing jointly it is $27,700. These amounts increase each year.

If your itemized deductions — such as mortgage interest, property taxes, or charitable donations — exceed the standard deduction, you can itemize instead. Montana allows you to deduct the same types of expenses the federal government does, though some limits may differ.

Montana also offers tax credits for specific situations. These include credits for dependent children, education expenses, property taxes paid, and low-income households. Unlike deductions, which reduce your taxable income, credits reduce your tax bill dollar-for-dollar. The Montana Department of Revenue publishes a complete list of available credits in the Form 2 instructions each year.

How Montana Taxes Retirement Income and Distributions

Montana taxes distributions from retirement accounts — such as traditional IRAs, 401(k)s, and pensions — as ordinary income at your regular tax rate. However, Montana offers a partial exclusion for retirement income if you meet certain conditions. If you are age 59½ or older and have lived in Montana for at least 12 months, you may exclude up to $10,000 of retirement income per year from Montana taxation.

This exclusion applies to distributions from IRAs, 401(k)s, pensions, and other may have access to retirement plans. It does not explore to Social Security benefits, which are generally not taxed by Montana. The exclusion is claimed on Form 2, and you must provide documentation showing your age and Montana residency.

If you receive a distribution from a retirement account before age 59½, Montana taxes the full amount as ordinary income. You may also owe a 10% federal early withdrawal penalty, depending on the type of account and the reason for the withdrawal. Roth IRA distributions follow different rules — may have access to distributions are not taxed, while non-may have access to distributions may be taxed on the earnings portion.

Filing Your Montana Return and Where to Send It

You file your Montana return using Form 2, the Montana Individual Income Tax Return. The form comes with detailed instructions that explain each line and which schedules you need to attach. You can obtain the form and instructions from the Montana Department of Revenue website or by calling their taxpayer information line.

Montana accepts returns filed by mail or electronically through approved tax software. If you file electronically, the return is transmitted directly to the Montana Department of Revenue. If you mail your return, send it to the address listed in the Form 2 instructions — the address varies depending on whether you are including a payment or requesting a refund.

The important date to file your Montana return is the same as the federal important date, typically April 15. If you need more time, you can request an extension by filing Form 4868 with the federal government; this extension automatically applies to your Montana return as well. An extension gives you until October 15 to file, but any taxes owed are still due by April 15.

Frequently Asked Questions

Does Montana tax Social Security benefits?

No, Montana does not tax Social Security benefits. Even if you have substantial other income, your Social Security payments are excluded from Montana taxable income. This applies to retirement benefits, survivor benefits, and disability benefits paid by Social Security.

What if I moved to Montana during the year?

You file a part-year resident return for the year you move. You report only the income you earned while living in Montana as a resident. Income earned before you moved to Montana is reported on your previous state's return. You may also need to file a return in the state you moved from.

Can I deduct federal income taxes paid on my Montana return?

No, Montana does not allow you to deduct federal income taxes. However, you can deduct state and local property taxes, sales taxes (if you choose), and certain other taxes. The total of all state and local taxes you deduct is capped at $10,000 per year.

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

You may owe tax to both Montana and the state where you work. Montana taxes you on all income if you are a resident, regardless of where you earned it. However, Montana offers a credit for taxes paid to other states to reduce the amount you owe Montana. The credit prevents you from paying tax twice on the same income.

What happens if I do not file or pay Montana income tax?

If you do not file when required, Montana charges a failure-to-file penalty. If you do not pay taxes owed, Montana charges a failure-to-pay penalty plus interest on the unpaid amount. The longer the debt remains unpaid, the more interest accumulates. The Montana Department of Revenue may also place a lien on your property or garnish your wages to collect the debt.