Montana Income
Tax Rates & Rules

Montana uses two ordinary individual income tax rates in 2026: 4.7 percent and 5.65 percent. House Bill 337 expanded the amount of ordinary taxable income that stays in the 4.7 percent bracket and reduced the top ordinary rate from 5.9 percent to 5.65 percent.

Montana Changed Its Individual Income Tax Brackets for 2026

The 2026 ordinary-income brackets depend on filing status. The lower 4.7 percent rate applies to a much larger range of taxable income than it did in 2025.

These rates apply to Montana ordinary taxable income and do not include net long-term capital gains. Long-term capital gains have their own Montana rate structure.

Montana Taxes Long-Term Capital Gains at 3 Percent or 4.1 Percent

Montana keeps separate rates for net long-term capital gains. The rates remain 3 percent and 4.1 percent in 2026, while the bracket ranges were adjusted to match the new ordinary-income thresholds.

The capital-gain calculation interacts with ordinary income. A taxpayer cannot simply apply 3 percent to every long-term capital gain because the amount eligible for the lower capital-gains rate depends on the applicable bracket and the taxpayer's Montana ordinary income.

How Montana Taxable Income Is Calculated After the 2024 Simplification

For tax years beginning after 2023, Montana's individual income tax calculation is closely tied to federal taxable income. Taxpayers calculate federal taxable income, apply Montana additions and subtractions, then use the Montana rate table based on the character of the income.

• Calculate federal taxable income under the federal return.
• Add Montana-specific additions required by state law.
• Subtract Montana-specific subtractions allowed by state law.
• Determine Montana taxable income.
• Separate ordinary income from net long-term capital gains when required.
• Apply the 2026 Montana rate schedule.
• Subtract eligible nonrefundable and refundable Montana tax credits.

Montana no longer uses the pre-2024 system of separate state personal exemptions plus a separate Montana standard deduction. Changes to federal deductions can therefore affect Montana taxable income because the state now begins from federal taxable income and applies state adjustments.

Who Must File a Montana Income Tax Return?

A Montana filing requirement generally follows the federal filing requirement when the taxpayer is a resident, part-year resident or nonresident with Montana-source income. A Montana return can also be required when a taxpayer has a Montana addition or subtraction even without a federal filing requirement.

Taxpayers should also file when Montana tax was withheld or estimated payments were made and a refund may be due. Montana uses Form 2 for individual income tax returns.

Montana Residency Controls How Broadly Income Is Taxed

A Montana resident is generally taxed on income from all sources, even when the income is earned outside Montana. Residency can be based on domicile or maintaining a permanent place of abode in Montana.

A part-year resident is taxed on income received while living in Montana plus Montana-source income received while a nonresident. A nonresident is taxed only on Montana-source income.

Remote Work Performed in Montana Can Create Montana-Source Wages

A nonresident who physically works remotely from Montana can have Montana-source wages even when the employer is located in another state. Montana's current residency guidance treats wages earned while the worker is physically in Montana as Montana-source income.

Montana also has a filing exclusion for certain nonresidents who earn only wages for services performed in Montana for 30 days or less and work in more than one state during the tax year. The exclusion has statutory exceptions, so workers such as certain athletes, entertainers, construction workers plus specified key or production employees should not assume they qualify.

For a payroll estimate based on current Montana withholding, use the Montana paycheck calculator before treating a pay-period result as annual tax.

Montana Has Wage Reciprocity With North Dakota

Montana has a reciprocity agreement with North Dakota for personal-services income such as wages, salaries, commissions plus employee fees. Montana residents earning qualifying wages in North Dakota generally pay Montana income tax instead of North Dakota income tax.

A North Dakota resident earning qualifying wages in Montana can claim exemption from Montana wage withholding by completing the current Form MW-4 process. The agreement does not cover every type of income, so business or investment income can still require separate state analysis.

Montana Withholding Changed for 2026

Montana updated its wage withholding tables and Form MW-4 for 2026 after the rate and bracket changes. Employers should use the 2026 Montana Employer and Information Agent Guide rather than earlier tax-year withholding tables.

The 2026 withholding method also moved away from the older allowance-based approach. Employees no longer use Montana personal and dependent allowances or a separate Montana standard deduction to calculate wage withholding in the same manner used before the update.

The Montana Earned Income Tax Credit Increases to 20 Percent in 2026

House Bill 337 increases the Montana Earned Income Tax Credit to 20 percent of the federal Earned Income Tax Credit beginning in tax year 2026. The Montana credit is refundable for qualifying taxpayers.

Eligibility still depends on qualifying for the federal EITC plus meeting Montana requirements. Taxpayers must file a Montana return to claim the state credit.

Credit for Tax Paid to Another State Has Source-Income Limits

A full-year or part-year Montana resident can claim a credit for qualifying income tax paid to another state or country when the same income is also taxed by Montana. The income must actually be derived from the other jurisdiction for the credit to apply.

This source rule matters for remote work. Montana guidance specifically explains that wages earned while working remotely in Montana are sourced to Montana, so tax paid to another state under that state's convenience rule does not automatically qualify for the Montana credit.

Montana's Final 2026 Form 2 Instructions Are Not Yet Posted

As of August 25, 2026, Montana has published the 2026 tax rates, withholding rules and major legislative changes, but the Department of Revenue's Form 2 repository still lists individual return instructions only through tax year 2025. Final tax-year 2026 filing thresholds and line-by-line return instructions should therefore be checked again when the 2026 Form 2 instructions are released.

This distinction matters for E-E-A-T and tax accuracy. A current rate can be confirmed for 2026 without pretending that every annual return threshold or form line has already been finalized.

Pay Stubs Help Track Montana Withholding but Do Not Determine Final Tax

A pay stub can show Montana withholding, current wages and year-to-date amounts, but the annual Form 2 determines final Montana income tax after federal taxable income, Montana adjustments, capital gains treatment plus tax credits are considered.

Once payroll has been calculated from genuine records, the Montana pay stub generator can organize wages and deductions into a clear statement. The main check stub generator is intended for lawful payroll and recordkeeping use.