Updated October 5, 2026. Quick answer: Yes. Montana’s Department of Revenue lists the “partial pension, annuity, and IRA exemption” among the subtractions repealed as of January 1, 2024, so annuity income is taxed at 4.7% or 5.9% for 2025.
More state retirement-income schedules, line by line: Montana Form 2 retirement lines.
How Montana treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed; the pension and annuity exemption was repealed from 2024 |
| The repeal | “Several subtractions were repealed as of January 1, 2024, including:” |
| 2025 rates | 4.7% below $21,100 of taxable income and 5.9% at or above it for a single filer (joint: break at $42,200) |
| 2026 rates | 4.7% up to $47,500 for a single filer and 5.65% above |
| 2027 rates | 4.7% up to $65,000 and 5.4% above |
| New subtraction | “There is a new subtraction for working military retirees” |
A $24,000 example
If $24,000 of annuity payments were a single filer’s whole taxable income for 2025, the tax is $1,162.80, computed as $21,100 x 4.7% + ($24,000 minus $21,100) x 5.9%, before deductions.
For 2026 the same $24,000 sits under the $47,500 line, so it is $24,000 x 4.7% = $1,128, before deductions.
What changes in 2026
House Bill 337 changes the rates for tax years 2026 and 2027, to 4.7% up to $47,500 and 5.65% above for 2026 (single filer). Nothing on annuity income changes.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether Montana taxes pensions, how Montana taxes retirement income, state tax on 401(k) and IRA withdrawals, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- Overview of Changes to Form 2 (Montana Department of Revenue): https://revenue.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2/Form-2-Changes.pdf
- 2025 Montana Form 2 Individual Income Tax Instructions (Montana Department of Revenue): https://revenue.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2025_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf
- HB337: 2026-2027 Montana Individual Income Tax Changes (Montana Department of Revenue): https://revenue.mt.gov/news/recent-news/HB-337
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.