An Overview of Montana State Taxes
It’s important to have a firm understanding of the federal income tax system, as well as your local tax system. Tax credits and exemptions can limit your tax liability and in some cases, increase your tax refund. When you understand how your business expenses, children, or medical expenses can be used to reduce your tax liability, you’ll ensure you’re paying only the taxes you owe so you can save more money for retirement or vacations.
If you’re a Montana resident, finding out more about the state’s tax regulations will ensure you maximize your tax refund and abide by the local tax laws. This guide will provide you with important information and useful advice on Montana’s tax regulations.
Table of Contents
Montana Income Tax
Montana has a graduated income tax system, so the tax rate you’re responsible for paying depends on how much income you earned throughout the year. This system is different than other state systems that implement flat income taxes, which is one set tax rate, no matter how much income you earn.
There are seven tax brackets you could fall into based on the income you earn, which include the following:
|Taxable Income Earned||Tax Rate|
|$0 to $3,100||1%|
|$3,101 to $5,400||2% minus $31|
|$5,401 to $8,200||3% minus $85|
|$8,201 to $11,100||4% minus $167|
|$11,101 to $14,300||5% minus $278|
|$14,301 to $18,400||6% minus $421|
|Over $18,400||6.9% minus $587|
Income Tax Credits
If you qualify, you can claim individual or family tax credits to reduce your tax liability, which may include the following:
- Adoption Credit: Claim a $1,000 tax credit per child you adopt who’s under 18 or a child who’s disabled (except stepchildren) and meets the standards of Section 23 of the Internal Revenue Service (IRS) code.
- Historic Buildings Conservation Credit: Earn 25% of the federal credit allowed if you spend money on rehabilitation supplies and services to improve a historical building. The Federal Investment Credit form (Form 3468) must be attached to your return.
- Elderly Care Credit: If you meet the low-income qualifications and have spent money on specific types of care for a qualified elderly family member, you may earn a 20% to 30% tax credit.
- Alternative Energy System Credit: If you installed a new alternative energy system in your home, such as a geothermal or solar power system, you may qualify for a $500 tax credit.
Income Tax Exemptions
The state also provides several tax exemptions from specific types of income you earned or were awarded throughout the year, including the following:
- Certain retirement income: Railroad retirement benefits are exempt from income taxes, as well as certain Medicare premiums, disability pensions, and partial exemptions for some annuities and pensions.
- Military income: If you served in the military, some of your income may be exempt if it came from active duty service and meets other criteria for the tax exemption.
- Montana medical care savings account contributions: If you established a Montana Medical Savings Account (MSA), up to $3,500 of the contributions you made throughout the year are exempt from taxes.
Montana Sales Tax
Unlike many other states, there is no sales tax in Montana. There is also no local sales tax imposed in specific counties, so all purchases made in the state are not subject to this tax. When you make a purchase, the effective sales tax rate is 0%. The state also doesn’t implement a use tax, so your online or out-of-state purchases are not subject to state sales tax.
Montana Property Taxes
Montana county treasurers collect property taxes on residential property. To determine the taxes owed, county assessors complete valuations on property once every two years to calculate market value. They analyze your property’s characteristics and the current market to determine this value.
The taxes property owners must pay are calculated using 100% of the market value and the current county tax rate. Property bills are sent out to homeowners each year in late October. First payment installments are due within 30 days after you receive the bill or by November 30, whichever is later. The second and final installment is due May 31.
Property Tax Assistance Program
If you’re on a fixed or low income, you may qualify for the Property Tax Assistance Program (PTAP) in Montana. Depending on the value of your property, your income, and the property taxes you owe, you may be eligible to receive a reduction in taxes between 30% to 80%. You must complete an application and turn it into your county treasurer’s office by April 15 to be considered for the tax reduction.
Montana Estate Taxes
There is no inheritance tax in Montana. The state also doesn’t have an effective estate tax. However, if a death occurred before January 1, 2005, there may be a filing requirement even if no taxes are owed. In this case, the fiduciary may be responsible for submitting a Montana Income Tax Return for Estates and Trusts (Form FID-3).
Tips for Filing Taxes in Montana
Income taxes in Montana are due on April 15 each year. You may file your taxes electronically through the Montana Department of Revenue (DOR). You can also use this site to check the status of your return or gain access to other helpful resources.
If you have specific questions about your taxes, need to set up a payment plan, or want face-to-face assistance, contact the local tax office. Before you attempt to file your taxes or ask for help, be sure you have the documents you need to file, which may include W-2 forms or information on charitable contributions you made throughout the year. Be prepared to provide accurate bank account information so you can receive your tax refund by direct deposit or pay the taxes you owe.
When you understand the Montana tax system, you’ll be sure you file your taxes on time and pay the correct amount. By taking advantage of the state’s tax credits and exemptions, you can limit your tax liability while still abiding by tax laws.
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This post was updated February 20, 2020. It was originally published February 20, 2020.