Updated October 4, 2026. Quick answer: Partly. Montana’s Form WMRE lets a military retiree exempt “50% of the taxpayer’s military retirement income received from service” or total Montana-source earned income, whichever is less, for a retiree who meets the residency conditions.
More state retirement-income schedules, line by line: Montana Form 2 retirement lines.
How Montana treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | Exempt the lesser of 50% of military retirement income or total Montana-source wages, business, partnership, S corporation and farming income; Form 2, Schedule I, Part I, line 13 |
| Survivors | A military survivor benefit recipient may exempt 50% of taxable survivor benefits |
| Residency | Became a Montana resident after June 30, 2023, or established residency before the retirement or survivor benefits began; attach Form WMRE to Form 2 |
| Age | None printed |
| Rate on the rest | 2025 single-filer rates are 4.7% up to $21,100 of taxable income and 5.9% at $21,100 or more |
A $30,000 example
A qualifying retiree with $30,000 of military retired pay and at least $15,000 of Montana-source earned income exempts 50% of the pay, computed as $30,000 x 50% = $15,000. With less Montana earned income, the exemption is that smaller figure.
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What changes in 2026
The exemption was set to expire December 31, 2033, and the 2025 Department documents say a 2025 bill removed that expiration date. They name the bill differently, Senate Bill 124 in one and Senate Bill 93 in the other, and the bill text was not read.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Publication 3, Armed Forces’ Tax Guide.
Related: whether Montana taxes pensions, how Montana taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- 2025 Montana Working Military Retirement and Survivor Benefit Exemption (Form WMRE) and Instructions: https://revenuefiles.mt.gov/files/Forms/Montana-Working-Military-Retirement-and-Survivor-Benefit-Exemption.pdf
- 2025 Montana Individual Income Tax Return Form 2 Instructions: https://revenuefiles.mt.gov/files/Forms/Montana-Individual-Income-Tax-Return-Form-2-Instructions/2025_Montana_Individual_Income_Tax_Return_Form_2_Instructions.pdf
Sources: the primary documents linked above, read on October 4, 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.