Montana Tax Rates for Individuals and Businesses
Explore Montana's tax system for residents and businesses, defined by its income and property tax structure in the absence of a statewide sales tax.
Montana’s government primarily funds its services through income taxes on individuals and corporations and property taxes on real estate. A key feature of the state’s financial landscape is the absence of a general statewide sales tax. This policy makes it one of only a few states without a broad-based tax on goods and services, placing a greater emphasis on other forms of taxation.
Individual Income Tax Rates
Montana’s individual income tax structure has undergone significant simplification, transitioning the state from a seven-bracket system to a two-rate system. This change was designed to align Montana’s tax calculations more closely with the federal system and reduce complexity for taxpayers.
Under the current system, Montana has two marginal tax rates: 4.7% and 5.9%. The rate applied depends on a taxpayer’s filing status and taxable income level. For the 2025 tax year, single filers and those married filing separately will pay 4.7% on taxable income up to $20,500 and 5.9% on income above that threshold. For married couples filing jointly, the 4.7% rate applies to the first $41,000 of taxable income, with the 5.9% rate applying to amounts greater than that. Heads of household are subject to the 4.7% rate on income up to $30,750 and the 5.9% rate on income exceeding that amount.
A major component of the tax simplification was conforming to the federal standard deduction. Montana no longer has its own separate standard deduction or personal exemptions. Instead, the calculation of Montana taxable income begins with federal taxable income. This change eliminated many state-specific deductions, but a new subtraction was introduced, allowing taxpayers aged 65 and older to deduct $5,500 from their income.
Property Taxes
Property taxes represent a substantial component of the tax obligations for Montana residents and are a primary funding source for local governments. The system operates based on two main elements: the assessed value of the property and the mill levy applied to that value. The Montana Department of Revenue is responsible for appraising property and determining its taxable value.
The actual tax bill is determined by local jurisdictions, including counties, cities, and school districts. Each of these entities sets its own mill levy, the tax rate applied to the taxable value of properties within its boundaries. One mill represents $1 in tax for every $1,000 of taxable value. The total mill levy for a specific property is the sum of the levies from all applicable local taxing authorities.
Because these mill levies are set at the local level, property tax liabilities can vary significantly from one community to another. A property in a highly-developed urban area with numerous public services may face a much higher total mill levy than a similar property in a rural county. For precise information on applicable rates, property owners should consult their local county treasurer’s office, which manages the billing and collection of these taxes.
Business and Corporate Taxes
Businesses operating in Montana are subject to a distinct set of tax regulations. The state imposes a flat corporate income tax rate of 6.75% on the net income of traditional C corporations. This tax applies to profits earned by these entities from their activities within the state.
The tax treatment differs for other types of business structures, commonly referred to as pass-through entities. These include S corporations, Limited Liability Companies (LLCs), and partnerships. By default, these businesses do not pay income tax at the entity level. Instead, the profits and losses are “passed through” to the individual owners, partners, or members, who then report the income on their personal state tax returns. This business income is then taxed at the individual income tax rates.
However, Montana allows pass-through entities to annually elect to be taxed at the entity level. Under this Pass-Through Entity Tax (PTET) election, the business pays a 5.9% tax on its income. Owners can then claim a credit on their individual Montana income tax returns for the amount of tax paid by the entity on their share of the income. Businesses with employees are also required to pay state unemployment insurance (SUI) taxes.
Sales and Miscellaneous Taxes
Montana is well-known for its absence of a statewide general sales tax. This means that consumers do not pay a state tax on the purchase of most goods and services. This approach simplifies transactions and means the price seen on the shelf is the final price paid.
However, the state does impose several specific statewide taxes. These include taxes on lodging accommodations, rental cars, and medical marijuana.
While there is no state-level general sales tax, some specific localities are permitted to levy their own taxes on certain items, known as resort and local option taxes. These taxes are only implemented in designated resort communities that meet specific criteria related to tourism. The tax is applied to a narrow range of goods and services catering to visitors, such as lodging, rental cars, and restaurant meals. Communities like West Yellowstone, Whitefish, and Big Sky are examples of areas that have implemented such taxes.