Updated October 5, 2026. Quick answer: Yes. Montana taxes interest and dividends as ordinary income at 4.7% on the first $21,100 and 5.9% above that for a single filer in 2025. Interest on other states’ bonds is added back and U.S. obligation interest is subtracted.
How Montana treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the two-rate schedule |
| 2025 rates (single) | “First $21,100 of Montana Ordinary Income 4.7%”; “Montana Ordinary Income exceeding $21,100 5.9%” |
| What is ordinary income | Interest is ordinary income, and so are qualified dividends, which the instructions treat as “all taxable income that is not considered a net long-term capital gain” |
| Other states’ bonds | Schedule I adds “Interest and mutual fund dividends from state, county, or municipal bonds” of other states; the instructions print no separate addition for Montana’s own bonds |
| U.S. obligations | Line 9 subtracts “Interest and mutual fund dividends from federal bonds, notes, and obligations” |
| Guaranteed only | “Interest on obligations that are only guaranteed by the U.S. government” cannot be subtracted, such as Ginnie Mae and Fannie Mae |
| Age 65 deduction | The Form 2 changes page lists the “partial interest income deduction for taxpayers 65 and older” as repealed from January 1, 2024 |
A $20,000 example
Taxable dividends and interest of $20,000 taxed wholly at 4.7% would add $20,000 x 4.7% = $940; above the first $21,100 of ordinary income, at 5.9%, $20,000 x 5.9% = $1,180.
What changes in 2026
HB 337 changes the next two years: for 2026 the lower 4.7% rate reaches $47,500 for a single filer with 5.65% above, and for 2027 the upper rate falls to 5.4%. It says the bill is “expanding the bracket for the lower rate and reducing the upper rate”.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Montana taxes capital gains, whether Montana taxes pensions, how Montana taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Montana Form 2 Instructions: https://revenue.mt.gov/files/Forms/2025/2025-Form-2-Instructions.pdf
- 2025 Montana Tax Tables and Deductions: https://revenue.mt.gov/individual/2025-montana-tax-tables-and-deductions
- HB337: 2026-2027 Montana Individual Income Tax Changes: https://revenue.mt.gov/news/recent-news-updates/hb337-2026-2027-montana-individual-income-tax-changes
- 2025 Montana Form 2 Changes: https://revenue.mt.gov/files/Forms/2025/2025-Form-2-Changes.pdf
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.