Montana retirement taxes at a glance (2026)
| State income tax | Graduated, top rate 5.65%Montana has two brackets, 4.7% and 5.65% for 2026. The top rate fell from 5.9% under HB 337 (2025) and is set to fall to 5.4% in 2027. |
|---|---|
| Social Security | TaxedMontana taxes the part of Social Security benefits that is included in federal taxable income. It is one of the few states that still does this. |
| Pensions | TaxedPensions are taxed as ordinary income. Each taxpayer age 65 or older can subtract $5,500 (indexed for inflation; $5,660 for 2025) from taxable income, but this is a general senior subtraction, not a pension exclusion. |
| 401(k) and IRA withdrawals | TaxedTraditional IRA and 401(k) withdrawals are taxed as ordinary income. The age-65 subtraction can offset part of this income. |
| Government pensions | TaxedState, local, and federal government pensions are taxed like other pensions. Railroad retirement benefits are exempt under federal law. |
| Military retirement pay | Partly taxedMilitary retirement is generally taxed. Retirees with Montana wage or business income can subtract the lesser of that income or 50% of their military retirement pay, for 5 consecutive years; the same 50% applies to military survivor benefits. |
| Estate tax | No |
| Inheritance tax | No |
| Property tax help for seniors | The Elderly Homeowner/Renter Credit gives a refundable credit of up to $1,150 to residents age 62 or older with household income under $45,000. A separate property tax assistance program reduces taxable value by 30% to 80% based on income. |
| Sales tax | Montana has no state sales tax. |
Recent changes and good to know
- HB 337 (2025) cut the top rate to 5.65% for 2026 and 5.4% for 2027, and widened the brackets.
- SB 93 (2025), effective for tax years after Dec. 31, 2025, removed the 2033 sunset of the working military retirement exemption. The 5-consecutive-year limit stays in law.
- Montana repealed its older pension-specific exclusion in its 2024 tax simplification and replaced it with the age-65 subtraction.
How to lower your retirement taxes in Montana
- Mix your income sources. Roth IRA withdrawals are tax-free at the federal level and generally in Montana too, so a Roth conversion before retirement can cut state tax later. Try the Roth conversion calculator.
- Watch federal Medicare costs. Large IRA withdrawals can raise your Medicare premiums. Check the 2026 IRMAA brackets.
- Think about your heirs. See what your IRA will really cost your family with the Family Tax Rate calculator.
- Comparing states? These have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
Frequently asked questions
Does Montana tax retirement income?
Yes. Montana taxes Social Security, pensions, and IRA/401(k) withdrawals, with only a $5,500 subtraction for people age 65 and older.
Does Montana tax Social Security?
Montana taxes the part of Social Security benefits that is included in federal taxable income. It is one of the few states that still does this.
Does Montana tax pensions?
Pensions are taxed as ordinary income. Each taxpayer age 65 or older can subtract $5,500 (indexed for inflation; $5,660 for 2025) from taxable income, but this is a general senior subtraction, not a pension exclusion.
Does Montana tax 401(k) and IRA withdrawals?
Traditional IRA and 401(k) withdrawals are taxed as ordinary income. The age-65 subtraction can offset part of this income.
Does Montana tax military retirement pay?
Military retirement is generally taxed. Retirees with Montana wage or business income can subtract the lesser of that income or 50% of their military retirement pay, for 5 consecutive years; the same 50% applies to military survivor benefits.
Sources (last verified 2026)
- Montana State Taxes: 2026 Tax Season Facts — AARP (2026-05-05)
- Working Military Retirement Exemption — Montana Department of Revenue (2026-09-24)
- SB 93 (2025) enrolled bill — Montana Legislature (2025)
- State Individual Income Tax Rates and Brackets, 2026 — Tax Foundation (2026-02-17)
- Does Montana Tax Pensions and Retirement Income? — LegalClarity (2026-08-13)
Educational content only, not tax, legal or investment advice. Plans and tax laws change; confirm details with your employer's plan documents or your state revenue department. Smart Financial Lifestyle is not affiliated with any employer named on this site.