Retirement Taxes in Montana (2025)
Middle of the pack. Income tax: two brackets, 4.7% and 5.9%. Social Security: taxed, following the federal calculation. Retirement account withdrawals: taxable.
Seeded with roughly 14% — about 10% effective federal plus an estimated 4% Montana tax on retirement withdrawals. Change it to your own rate.
What Montana taxes in retirement
| State income tax | Two brackets, 4.7% and 5.9% |
|---|---|
| Social Security | Taxed, following the federal calculation |
| 401(k) and IRA withdrawals | Taxable |
| Pensions | Taxable; the old pension exemption was replaced by a larger standard deduction at 65+ |
| Estate or inheritance tax | None |
| Average combined sales tax | 0% |
| Average effective property tax | 0.69% 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 estimated 4% and it lasts about 17.7 years — a difference of roughly 1.1 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 0.69% 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.
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 larger standard deduction at 65+.
Is Montana a good state to retire in for taxes?
Middle of the pack on income tax. We estimate roughly 4% effective state tax on $40,000 a year of withdrawals for a 65-year-old single filer. There is no sales tax and effective property tax about 0.69% 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.
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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 2025 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 estimate is a planning figure, not a filing figure.