Retirement Taxes in Montana (2026)
Tax-friendly. Income tax: two brackets, 4.7% and 5.65% for 2026. Social Security: taxed, following the federal calculation. Retirement account withdrawals: taxable.
Seeded with roughly 11% — about 10% effective federal plus 1.2%, the Montana tax on $40,000 of IRA withdrawals at 65 under 2026 rules. Change it to your own rate.
What Montana taxes in retirement
| State income tax | Two brackets, 4.7% and 5.65% for 2026 |
|---|---|
| Social Security | Taxed, following the federal calculation |
| 401(k) and IRA withdrawals | Taxable |
| Pensions | Taxable; the old pension exemption was replaced by a subtraction of about $5,660 per person at 65+ |
| Military retirement pay | Taxable for most retirees: the subtraction is the smaller of half the military pension and the retiree’s Montana wage or business income, so someone with no such income gets none |
| Estate or inheritance tax | None |
| Average combined sales tax | 0% |
| Average effective property tax | 0.61% of home value |
Montana is one of the last states taxing Social Security on the federal formula, and it removed its pension exemption in the 2024 reform. The compensation is no sales tax at all.
What the state tax actually costs you
Take a $500,000 balance and withdraw $2,500 a month, rising with inflation. At an effective federal rate of 10% alone, the money lasts about 18.8 years. Add Montana's 1.2% and it lasts about 18.5 years — a difference of roughly 0.3 years.
That is the honest scale of it. State income tax is real money, but for most retirees it changes the answer by months or a couple of years, not decades — and it is usually smaller than the effect of housing costs, which is why a move made purely for income tax often fails to pay for itself.
The taxes that are not income tax
Retirees feel sales and property tax more than working-age households do, because a larger share of a fixed income goes on spending and on staying in a house that is already owned. Montana charges no sales tax at all and levies an average effective property tax of about 0.61% of a home's value, which is well below the national average.
There is no state estate or inheritance tax, so only the federal estate tax applies and its exemption is high enough that almost no estate owes it.
How long $500,000 lasts here
Take a single 67-year-old with $500,000 in an IRA, the average Social Security check and $4,000 a month of spending. In Montana that money runs out at 92 and 8 months, 16 months sooner than in a state with no income tax. Counting Montana's prices as well, it runs out at 98 and 5 months. How long $500,000 lasts in every state compares all 51.
Should you move for the tax?
Compare the whole burden rather than one line of it. States without an income tax raise the money elsewhere — Texas and New Hampshire through property tax, Tennessee and Washington through sales tax — so the saving is often smaller than the headline suggests. Run your own numbers in the calculator above, then look at what the same house costs in each state, what insurance costs, and how far you would be from family and from the specialists you already use.
Establishing residency is also a formal exercise, not a preference: high-tax states audit departing retirees on days present, driver's licence, voter registration, where the primary home is, and where a doctor and a dentist are. Half-measures lose.
Frequently asked questions
Does Montana tax Social Security benefits?
Taxed, following the federal calculation. Montana is one of only eight states that still tax Social Security at all, and the income thresholds mean many retirees pay nothing. See which states tax Social Security.
Does Montana tax 401(k) and IRA withdrawals?
Taxable. Pensions are treated separately — Taxable; the old pension exemption was replaced by a subtraction of about $5,660 per person at 65+.
Does Montana tax military retirement?
Taxable for most retirees: the subtraction is the smaller of half the military pension and the retiree’s Montana wage or business income, so someone with no such income gets none. See which states do not tax military retirement.
Is Montana a good state to retire in for taxes?
Tax-friendly on income tax. A 65-year-old single filer pays about 1.2% in state income tax on $40,000 a year of IRA withdrawals under the 2026 rules. There is no sales tax and effective property tax about 0.61% of home value. Estate or inheritance tax: none.
Does Montana have an estate or inheritance tax?
No. Montana levies neither an estate tax nor an inheritance tax, so only the federal estate tax applies, and its exemption is high enough that very few estates owe anything.
Other tax-friendly states
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SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions.
Reviewed for the 2026 tax year. Several states are part-way through scheduled rate cuts or phase-outs, and thresholds are often indexed annually — confirm current figures with the Montana tax agency (listed at taxadmin.org) or a tax professional before acting. The effective rate is a planning figure, not a filing figure.
Printed from https://savingslast.com/retirement-taxes-in-montana/ on . The figures reflect the inputs shown and the rules as published on that date.