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Montana Taxes: What You Need to Know
Montana’s state income tax rate ranges from 4.7% to 5.65% for 2026 — a significant update from the 5.9% top rate in prior years. Montana is one of only five states that charges no general state or local sales tax, so residents pay no sales tax on everyday purchases. This makes Montana a tax-friendly state overall, even as income taxes apply to wages, business income, and most other sources.
Montana levies taxes on property, natural resources, and corporate and personal income. The state also taxes specific items like alcohol, tobacco, and gasoline, but does not have a general sales tax.
All taxpayers in Montana use the same two income tax rates regardless of filing status, though the bracket thresholds differ by filing status. No cities in Montana levy local income taxes.
| Tax Type | Rate/Percentage |
|---|---|
| Individual Income Tax | 4.7% – 5.65% (two-bracket progressive system) |
| Corporate Income Tax | 6.75% (Source) |
| Long-Term Capital Gains Tax | 3.0% and 4.1% (Source) |
| Cigarette Tax | $1.70 per pack of 20 cigarettes (Source) |
| Sales Tax | None (Source) |
Federal, State, and Local Tax Withholding
Employers must withhold federal and state taxes from employees’ paychecks. The amount withheld is based on the employee’s earnings and the information provided on their withholding forms. Montana uses its own withholding certificate — Form MW-4 — and no longer accepts federal Form W-4 for state withholding purposes. Employers should ensure employees complete an updated MW-4, particularly given the significant changes to withholding methods and bracket thresholds effective January 1, 2026. (Source)
Montana has no local income taxes. No cities in the state levy earnings or wage taxes.
FICA & State Insurance Taxes
FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare:
- Social Security Tax: 6.2% per employee on wages up to $184,500 in 2026. (Source)
- Medicare Tax: 1.45% on all wages, with an additional 0.9% on wages over $200,000 (single filers) or $250,000 (married filing jointly). (Source)
Montana’s unemployment insurance (UI) program is funded entirely by employers — no deductions are made from employee wages. (Source)
The UI taxable wage base for 2026 is $47,300 per employee, which is 80% of Montana’s 2024 average annual wage. The 2026 Rate Schedule is Schedule I, meaning experience-rated employer rates range from 0.00% to 6.12%, with an average rate of 0.95%. New employer rates vary by industry, ranging from 1.00% to 2.00% for most classifications. (Source)
Pre-Tax Deductions
Before taxes are calculated, pre-tax deductions are taken from an employee’s gross pay. This includes contributions to medical insurance, retirement plans like 401(k)s, and flexible spending accounts (FSAs). These deductions reduce the employee’s taxable income, resulting in a lower overall tax liability.
Montana’s taxable income is now based on federal taxable income — meaning Montana’s calculation begins after the federal standard deduction or itemized deduction has already been applied. Montana no longer has its own separate standard deduction, personal exemptions, or dependent exemptions. (Source)
Median Household Income in Montana
According to the U.S. Census Bureau’s 2024 American Community Survey 1-year estimates, Montana’s median household income was $72,509 — a 3.7% increase from $69,922 in 2023.
| Year | Median Household Income |
|---|---|
| 2024 | $72,509 |
| 2023 | $69,922 |
(Source)
Montana’s median household income sits below the national median. Income levels vary significantly across the state — the Bozeman and Gallatin County area has seen rapid income growth driven by an influx of high-earning remote workers, while more rural eastern and northern Montana counties typically report lower incomes.
Montana Tax Brackets 2026
Montana’s income tax brackets were updated for 2026 under House Bill 337, passed during the 2025 Montana legislative session. The top rate decreased from 5.9% to 5.65%, and the 4.7% lower-rate bracket was significantly expanded. These changes apply to tax years 2026 and 2027 (with further changes in 2027). (Source)
Montana has two tax rates based on a taxpayer’s filing status. Lower-income taxpayers are taxed at 4.7%, while higher earners move into the 5.65% bracket. This means lower income is taxed at a lower rate, while higher income is taxed at a higher rate.
Here are the Montana tax brackets for 2026:
| Filing Status | Tax Rate | Taxable Income Range |
|---|---|---|
| Single and Married Filing Separately | 4.7% | $1 – $47,500 |
| 5.65% | Over $47,500 | |
| Head of Household | 4.7% | $1 – $71,250 |
| 5.65% | Over $71,250 | |
| Married Filing Jointly and Surviving Spouse | 4.7% | $1 – $95,000 |
| 5.65% | Over $95,000 |
Note: Taxable income does not include long-term capital gains, which are taxed at separate rates of 3.0% and 4.1%. (Source)
Example Calculation
Let’s say you are a single filer with a taxable income of $60,000:
✅ First Bracket:
Income up to $47,500 is taxed at 4.7%.
Tax: $47,500 × 4.7% = $2,232.50
✅ Second Bracket:
Income over $47,500 is taxed at 5.65%.
Tax: ($60,000 – $47,500) × 5.65% = $12,500 × 5.65% = $706.25
✅ Total Tax:
$2,232.50 + $706.25 = $2,938.75
So, a single filer with a taxable income of $60,000 would owe approximately $2,939 in Montana state income tax for 2026.
