2026 edition · statute-cited · part of Clear Money Guide’s 51-state retirement tax series. This guide covers state taxes on retirement income and estate transfers; property and sales taxes vary by county and are outside its scope.
Updated July 24, 2026. Quick answer: Montana is the opposite of its no-sales-tax reputation on retirement income: it is one of the few states that taxes Social Security (to the extent it’s federally taxable, since the TY2024 restructure started from federal taxable income), and pensions, 401(k) and IRA withdrawals are fully taxable — the old partial pension exemption was repealed with the TY2024 rewrite, another change stale guides miss. What softens it: a $5,500 subtraction at 65+ (any income type), the larger federal standard deduction flowing through, and a top rate cut to 5.65% for 2026 (HB 337; 5.4% scheduled for 2027). No estate or inheritance tax.
The three corrections (SS is taxed, the pension exemption is gone, the rate just dropped)
Coverage of Montana routinely gets three things wrong. First: Montana does tax Social Security — whatever portion is federally taxable flows into Montana taxable income (SB 399 of 2021, effective TY2024). Second: the old partial pension/annuity exemption no longer exists — repealed in the same restructure; guides still describing a $4,000-class exemption are two years stale. Third, the current-year figure: the top rate is 5.65% for 2026, cut from 5.9% by HB 337, with 5.4% scheduled for 2027 — a two-bracket structure (4.7% / 5.65%). One more for probate watchers: Montana’s former percentage fee cap (3% of the first $40,000, 2% above) was removed by 2019 legislation — compensation is now simply “reasonable” (MCA §72-3-631).
How Montana taxes retirement income (statute-cited)
| Income tax | Two brackets: 4.7% / 5.65% for 2026 (HB 337; top rate falls to 5.4% in 2027) |
| Social Security | Taxed to the federally taxable extent (up to 85% of benefits, at Montana rates) |
| Pension / 401(k) / IRA | Fully taxable — the old partial exemption was repealed (TY2024). 65+ receive a $5,500 subtraction against any income |
| Military retirement | Partial exemption (TY2024–2033) for qualifying new-resident or newly retired servicemembers |
| Estate / inheritance tax | None |
Probate: reasonable fees and a $100,000 affidavit
With the 2019 repeal of the percentage cap, Montana compensation is “reasonable” (MCA §72-3-631) — no schedule. Small estates: up to $100,000 of personal property (net of liens) passes by collection affidavit (MCA §72-3-1101) after a 30-day wait. Context: probate cost by state · small-estate limits by state.
Is Montana a good state to retire in for taxes?
For retirement income specifically, Montana is one of the tougher Western states: Social Security partially taxed, withdrawals fully taxed, and only a $5,500 senior subtraction between you and the 5.65% rate. The no-sales-tax advantage is real but helps spenders, not withdrawers. Wyoming next door taxes nothing; Idaho exempts Social Security. Montana’s falling rate schedule narrows the gap each year — but a Social-Security-heavy retiree crossing the border into Wyoming still deletes a tax bill entirely.
Montana vs. common alternatives
| State | Social Security | Pension / 401(k) / IRA | Estate tax | Inheritance tax |
|---|---|---|---|---|
| Montana | Taxed to the federally taxable extent | Fully taxable; $5,500 subtraction at 65+ | None | None |
| Idaho | Not taxed | Fully taxable at flat 5.3% (narrow gov-plan deduction) | None | None |
| Wyoming | Not taxed | Not taxed (no income tax) | None | None |
| South Dakota | Not taxed | Not taxed (no income tax) | None | None |
Comparison rows summarize general rules; see our 51-state retirement tax table for statute-cited detail.
Considering a Roth conversion? The converted amount is taxed as ordinary income in the year you convert, and Montana may treat it differently from the retirement income above — see how all 51 jurisdictions tax Roth conversions.
Finding a financial advisor in Montana
Per the SEC’s July 2026 Investment Adviser roster, Montana has 24 SEC-registered advisory firms (#47 nationally) managing $63.0 billion (#40 by AUM). Full breakdown: Montana advisor statistics. Reviewing fee structures: fee-drag calculator.
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What probate costs in Montana
Montana sets probate compensation by a “reasonable fee” standard with no percentage schedule, so anyone quoting a firm figure is estimating. And the small-estate shortcut of $100,000 does not clear a solely owned house on its own, which is the detail most guidance omits. Full detail with the governing statute, the court filing fee and the threshold: Montana probate cost. To price a specific estate, use the probate cost calculator.
Cite or share this guide
Suggested citation: Clear Money Guide, “Montana Retirement Taxes (2026 edition),” statute-cited; clearmoneyguide.com/montana-retirement-taxes/. Free to cite with attribution and a link. Data verified July 23–24, 2026 against state statutes, session laws, and revenue-department guidance.
Primary sources
- https://revenue.mt.gov/taxes/individual-income-tax/working-military-retirement-exemption
- https://revenue.mt.gov/montana-tax-simplification-resource-hub
- https://taxfoundation.org/research/all/state/2026-state-tax-changes/
- https://www.kiplinger.com/taxes/states-that-tax-social-security-benefits
- https://taxfoundation.org/data/all/state/estate-inheritance-taxes/
- https://mca.legmt.gov/bills/mca/title_0720/chapter_0030/part_0110/section_0010/0720-0030-0110-0010.html
- https://law.justia.com/codes/montana/title-72/chapter-3/part-6/
- https://bryanlawpc.com/recent-montana-legislative-changes-to-estates-and-businesses/