Montana fully taxes most forms of retirement income, while taxing a portion of Social Security benefits for retirees above a certain income level. Property taxes in Montana are fairly low. There is no sales tax in Montana.
Is Social Security Taxable in Montana?
How high are property taxes in Montana?
Montana has the third lowest population density of any state in the country, but it’s crowded with breathtaking scenery. From Glacier National Park to the headwaters of the Missouri River, Montana is the perfect place for seniors who want to spend their golden years surrounded by natural splendor.
Unlike its landscape, Montana’s tax system may disappoint some seniors. That’s because it fully taxes most forms of retirement income, while taxing a portion of Social Security benefits for retirees above a certain income level. Below, we answer key questions about retirement taxes in Montana, including the state’s sales and property taxes.
Is Montana tax-friendly for retirees?
Montana is moderately tax-friendly for retirees. Depending on your specific financial circumstances, you may find it very friendly or very unfriendly. For starters, the state has no sales tax, which lowers living costs for everyone. It also has relatively low property taxes.
On the other hand, many retirees pay taxes on Social Security retirement benefits, which is fully exempt in most other states (more on these rules in the next section). Likewise, Montana provides no exemption for retirement income from pensions or retirement accounts.
Yes, but there is a deduction available for taxpayers below a certain income level. For taxpayers with Adjusted Gross Income (AGI) of less than $25,000 for single filers or $32,000 for joint filers, all Social Security retirement income is deductible.
For taxpayers above those limits but below $34,000 for single filers or $44,000 for joint filers, half of Social Security retirement income is deductible. Above those second-level limits, 15% is deductible.
Are other forms of retirement income taxable in Montana?
Yes. Income from a pension or from a retirement account like a 401(k) or an IRA is treated as regular income and taxed at Montana’s state income tax rates. The table below shows brackets and rates for the Montana state income tax.
Property taxes in Montana are fairly low. The state provides an exemption on all residential property that greatly reduces the property tax burden of residential homeowners. The average effective property tax rate paid by homeowners is 0.85% across the state. That’s equal to $850 in property taxes for every $100,000 in home value. It’s important to note, however, that this will vary based on where in the state you live.
What is the Montana elderly homeowner tax credit?
Montana homeowners who are at least 62 years old can apply for a tax credit on their property taxes. To be eligible they must pay the property taxes for a home they occupy or rent. Total household income must be less than $45,000 and household income must be less than $35,000 to receive the full credit amount.
The Elderly Homeowner Credit is worth a maximum of $1,000. Claimants with household income of between $35,000 and $45,000 will receive between 40% and 10% of the full credit. The credit may also be less than $1,000 if your property taxes paid were below a certain level.
How high are sales taxes in Montana?
There is no sales tax in Montana. Retirees can do all of their Montana shopping tax-free.
What other Montana taxes should I be concerned about?
Capital gains are taxed as income in Montana, though they receive a credit of 2%. If you have investments with which you plan to supplement your income in retirement, keep in mind that you will pay state income taxes when you sell those investments.