State guides · MT

How Montana taxes retirement income

Some 2026 figures pending confirmation  Tax year 2026 · research last updated October 2, 2026

At a glance

Tax rates

Brackets apply to Montana taxable income. Other filing statuses are in the rules reference.

Social Security

Montana taxes Social Security to the same extent as your federal return does.

Pensions, IRAs and 401(k)s

Montana has no general exclusion for pension, IRA or 401(k) income in 2026. It's taxed at the rates above, after any deductions and credits.

Roth conversions

A Roth conversion counts as taxable income for Montana.

Capital gains

Separate lower rates on net long-term capital gains (MCA 15-30-2103; Form 2 page 2 worksheet). 'Net long-term capital gain' = the amount subject to the federal LTCG tax, generally the lesser of federal Schedule D line 15 or line 16 (Form 1040 line 7 if no Schedule D). Qualified dividends are NOT capital gains for Montana: they are Montana Ordinary Income taxed at 4.7%/5.65%. Stacking: Ordinary Income = MT taxable income minus NLTCG, taxed on the ordinary brackets; NLTCG is taxed at 3.0% on the portion that fits under the first-bracket threshold ($47,500 single/MFS, $95,000 joint/QSS, $71,250 HOH for 2026) minus Ordinary Income, and 4.1% on the rest. If Ordinary Income exceeds the threshold, all NLTCG is taxed at 4.1%.

Credits and relief for older residents

• Elderly Homeowner/Renter Credit (Form 2 Schedule 2EC). Refundable credit up to $1,150 for a resident 62 or older as of December 31 who lived in Montana at least 9 months and whose gross household income (includes ALL Social Security, taxable and nontaxable) is under $45,000. Credit is based on property tax or rent-equivalent in excess of a household-income-based threshold, then multiplied by a percentage that phases from 100% down to 0% between $35,000 and $45,000 of household income (e.g. 30% at $37,501-$40,000, 10% at $42,501-$44,999, 0% at $45,000+). Can be claimed even with no income tax filing requirement.

More detail from our research notes

Line 1 is federal AGI, line 2 subtracts the total of Form 1040 line 12e (federal standard or itemized deduction) AND line 13b (Schedule 1-A additional deductions: tips, overtime, car-loan interest, and the OBBBA enhanced $6,000 senior deduction). So the federal senior deduction (2025-2028) DOES flow through to Montana; the federal QBI deduction does not. The net effect is federal taxable income without QBI, then Montana additions/subtractions (Schedule I; state income tax included in itemized deductions is added back there). Montana repealed (effective 2024) the partial pension/annuity/IRA exemption, the 65+ partial interest exclusion, and the taxable-Social-Security addition/subtraction, so Social Security, pensions, IRA distributions and Roth conversions are taxed exactly to the extent included in federal taxable income. Age 65+ subtraction (Form 2 line 6): $5,660 per taxpayer 65 and older for tax year 2025 ($11,320 if MFJ and both 65+); it is a subtraction from federal taxable income (applies regardless of income type, no income limit) and is indexed annually for inflation (department publishes by Nov 1, rounded to nearest $10). It is stacked on top of the federal additional standard deduction for 65+ and the federal $6,000 senior deduction. Brackets: 2026 thresholds are set in statute (HB 337, 2025) and are NOT inflation-indexed for 2026; for 2027 the statute sets 4.7% up to $65,000 single/MFS, $130,000 MFJ, $97,500 HOH with top rate 5.4%, and indexing (June CPI, rounded to nearest $100) resumes after 2027. Military retirement subtraction for working military retirees exists (not modeled). Montana has no general retirement income exclusion. Montana Ordinary Income tax can be computed as rate x income less a subtraction (2025 tables printed '5.9% less $253' single); for 2026 the equivalent is 5.65% x OI less $451.25 single/MFS, less $902.50 MFJ, less $676.88 HOH (derived: threshold x 0.95%).

Pending confirmation

These points were still being confirmed against Montana's published 2026 forms when this page was built. Most are waiting on forms the state publishes around the turn of the year.

4 items

• 2026 age-65 subtraction: MCA 15-30-2120(3)(g), (7) and 15-30-2101(12) fix it at $5,500 x CPI-U(June of prior year)/CPI-U(June 2023), rounded to $10: 5,500 x 322.561/305.109 = 5,814.6 -> $5,810 (same formula reproduces 2025's published $5,660). DOR has not yet posted the 2026 figure (due by Nov 1, 2026; watch https://revenue.mt.gov/taxes/individual-income-tax and the 2026 Form 2 instructions, Dec 2026/Jan 2027).
• Whether the 65+ test is age 65 by Dec 31 of the tax year (assumed, consistent with federal) - statute says 'each taxpayer that has attained the age of 65'.
• Montana treatment of the OBBBA senior deduction confirmed for tax year 2025 via Form 2 instructions (line 2 includes Form 1040 line 13b); assumed unchanged for 2026 unless the 2026 Form 2 says otherwise.
• 2026 Form 2 page-2 'less' amounts are derived, not printed; the 2026 tax table in the 2025 instructions prints only rates and thresholds.

Sources

Every figure comes from these documents, mostly the state's own forms, instructions and statutes.

1. 2026 and 2027 ordinary and capital-gains brackets/rates (statute, temporary version through 12/31/2026 and 2027 version); MCA 15-30-2103 (MCA 2025): temporary version through 12/31/2026 and version effective 1/1/2027 ($65,000/$130,000/$97,500, 4.7%/5.4%; (3) indexing with June 2026 CPI base, rounded to $100, posted by Nov 1)https://mca.legmt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0030/0150-0300-0210-0030.html
2. DOR summary of HB 337 (2026: 4.7% to $95,000 MFJ/$71,250 HOH/$47,500 other, 5.65% above; 2027: 5.4%; LTCG 3.0%/4.1%)https://revenue.mt.gov/news/recent-news/HB-337
3. 2025 Form 2 instructions: line 2 = Form 1040 lines 12e + 13b (Schedule 1-A incl. senior deduction); line 6 $5,660/$11,320 65+ subtraction indexed; NLTCG definition and stacking; qualified dividends are ordinary; 2026 tax tables (page 42); Elderly…https://revenue.mt.gov/files/forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2025_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf
4. Form 2 changes from 2024 simplification: repeal of pension/IRA partial exemption, 65+ interest exclusion, taxable Social Security addition; start from federal taxable incomehttps://revenue.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2/Form-2-Changes.pdf
5. 2026 withholding update confirming 2026 rates/bracketshttps://revenue.mt.gov/news/recent-news/2026-withholding-updates
6. State income tax addition (Schedule I Part I line 4, Worksheet B: 5e - local income tax - 5b - 5c, limited to itemized - federal standard deduction) and Schedule 2EC Elderly Homeowner/Renter Credit (2025 Form 2 instructions pp. 15-16, 38-41; Schedule 2EC…https://revenue.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2/2025_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf
7. federalStandardDeduction*, federalAged*: 2026 federal standard deduction and additional amounts, Rev. Proc. 2025-32 sec. 4.15https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
8. MCA 15-30-2120(3)(g), (7): $5,500 subtraction per taxpayer 65+, multiplied by the inflation factor by Nov 1 each year, rounded to $10 ; MCA 15-30-2101(12): inflation factor = CPI June of previous tax year / CPI June 2023https://mca.legmt.gov/bills/mca/title_0150/chapter_0300/part_0210/section_0200/0150-0300-0210-0200.html
9. BLS CPI-U (CUUR0000SA0, NSA): June 2023 305.109, June 2024 314.175, June 2025 322.561, June 2026 333.952https://data.bls.gov/timeseries/CUUR0000SA0
10. MCA 15-30-2337, -2338, -2340 (MCA 2025): elderly homeowner/renter credit, 62+, gross household income under $45,000, $12,600 standard exclusion, max $1,150; not indexed ( -2338.txt, -2340.txt)https://mca.legmt.gov/bills/mca/title_0150/chapter_0300/part_0230/section_0400/0150-0300-0230-0400.html

Taxtirement's Montana calculation is also checked against a second, independent implementation on 1,000 random households. How we check our numbers.

This page summarizes Montana's 2026 rules as Taxtirement applies them, for education and planning. It isn't tax advice, and it doesn't cover every situation (for example part-year residents, businesses or military-only provisions). Rules change; check the state's current instructions, or a tax professional, before you act. Spotted something wrong? Tell us.