Is Montana Tax Free? A Breakdown of State Taxes

While Montana is not an entirely tax-free state, its reputation as a tax-friendly location stems from the absence of a statewide general sales tax. This means the price you see on most goods is the price you pay. However, residents are subject to other taxes, including levies on income and property that fund state and local governments.

Montana’s Sales Tax Status

Montana is one of a handful of states that does not impose a statewide sales tax. For everyday transactions, this means no additional tax is calculated at the point of sale. This approach simplifies commerce for both consumers and retailers.

This general rule has exceptions in certain localities. Montana law permits communities reliant on tourism to implement a “resort and local option tax” to fund public services. This tax applies to a narrow range of goods and services, such as lodging and restaurant meals, with locally determined rates. These taxes are only found in designated resort communities.

The State Individual Income Tax

Montana levies a progressive personal income tax, meaning higher incomes are taxed at higher rates. For the 2024 tax year, the state uses a two-bracket system. Single filers pay 4.7% on the first $20,500 of taxable income and 5.9% on income above that, while married couples filing jointly pay 4.7% on their first $41,000 of income.

All income earned within the state is subject to this tax, including for part-year residents and nonresidents with Montana-sourced income. Individuals must file a Montana Individual Income Tax Return (Form 2) if their gross income exceeds their standard deduction. The tax code provides for various adjustments, deductions, and credits that can lower a filer’s tax liability, such as for contributions to education savings plans or charitable endowments.

Understanding Property Taxes in Montana

Property tax is a primary source of funding for local governments like counties, cities, and school districts. These taxes are assessed and administered locally, not at the state level. The tax is based on the market value of a property as determined by the Montana Department of Revenue, which serves as the starting point for calculating the annual tax obligation.

A property tax bill is calculated using a “mill levy.” A mill is one-tenth of a cent, and the total levy is the sum of rates set by local jurisdictions. The property’s taxable value is multiplied by the total mill levy to determine the final tax. Because levies are set locally, property tax rates can differ substantially between counties and school districts.

Other Notable State Taxes

Beyond income and property taxes, Montana residents encounter several other specific state-level taxes.

• A fuel tax on gasoline and diesel, with revenue dedicated to funding the construction and maintenance of state highways. The gasoline tax rate is set at 33.75 cents per gallon.
• Excise taxes on alcohol and tobacco products, with the cigarette tax currently at $1.70 per pack.
• Vehicle registration fees, which are based on the vehicle’s age and value and contribute to state and local government funds.
• The absence of a state estate or inheritance tax, meaning assets passed from a deceased person to their heirs are not subject to any state-level tax.