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Montana Retirement Taxes (2026): Social Security Is Taxed, the Pension Exemption Is Gone, and the Rate Just Dropped

Clear Money Guide

What this state guide covers

A quick view of the questions, practical details and source notes below.

The three corrections (SS is taxed, the pension exemption is gone, the rate just dropped)
How Montana taxes retirement income (statute-cited)
Probate: reasonable fees and a $100,000 affidavit
Is Montana a good state to retire in for taxes?

Comparison tables scroll horizontally on smaller screens.

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taxable income), and pensions, 401(k) and IRA withdrawals are fully taxable — the old partial pension exemption was repealed with the TY2024 rewrite, another change stale guides miss.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 $5,660 subtraction at 65+ (TY2025 amount, indexed annually; 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.

More on public pension systems, topic by topic: Montana PERS early retirement, Montana PERS disability retirement and Montana PERS working after retirement.

More state retirement-income schedules, line by line: Montana Form 2 retirement lines.

Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Montana tax on inherited IRA withdrawals.

Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Montana tax 403(b) and 457(b) withdrawals.

Drawing a pension? Whether the state withholds tax from it, from its own documents: Montana tax withholding on pension payments.

Married, or planning for a spouse’s death? Whether the state is a community property state, from its own statutes: Is Montana a community property state?.

Selling your home? How the state taxes the profit, from its own tax documents: Does Montana tax the profit from selling your home?.

Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Montana tax withholding on IRA and 401(k) withdrawals.

For trust income specifically: does Montana tax trust income.

For dividends and interest specifically: does Montana tax dividends and interest.

Inheriting from, or planning for, someone in this state? Whether the state has an inheritance tax, from its own tax documents: Does Montana have an inheritance tax?.

For annuity payments specifically: does Montana tax annuity income.

Planning for what you leave behind? The state’s estate tax answer, from its own tax documents: Does Montana have an estate tax?.

For military retired pay: does Montana tax military retirement.

Saving for a child’s college? The state’s 529 break has its own page: Montana 529 plan tax deduction.

For the sale of stocks, funds or real estate: does Montana tax capital gains.

For 401(k) and IRA withdrawals specifically: does Montana tax 401(k) and IRA withdrawals.

Before the tax question, the Montana TRS payment options, refund and buyback rules: Montana TRS retirement decisions.

Before the tax question, the Montana PERS payment options, refund and service purchase rules: Montana PERS retirement decisions.

More on Montana: Transfer on Death Deed Montana and When Is Probate Required in Montana?

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 taxTwo brackets: 4.7% / 5.65% for 2026 (HB 337; top rate falls to 5.4% in 2027)
Social SecurityTaxed to the federally taxable extent (up to 85% of benefits, at Montana rates)
Pension / 401(k) / IRAFully taxable — the old partial exemption was repealed (TY2024). 65+ receive a $5,660 subtraction (TY2025, indexed annually) against any income
Military retirementPartial exemption (50% of military retirement, limited to Montana-source wage income, for 5 consecutive years) for qualifying new-resident or newly retired servicemembers
Estate / inheritance taxNone

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: if the probate estate, wherever located, less liens and encumbrances, does not exceed $100,000, a successor can collect tangible personal property and instruments by affidavit (MCA §72-3-1101), once 30 days have elapsed since the death and no application for a personal representative is pending or has been granted. 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 $5,660 (TY2025, indexed) 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.

Does Montana tax Social Security? All 51 jurisdictions, 202643 do not tax Social Security at any income level. 8 tax it only above an income or age limit. Montana is in the second group.Does Montana tax Social Security? All 51jurisdictions, 202643 do not tax Social Security at any incomelevel. 8 tax it only above an income or agelimit.Montana is in the second group.Not taxed at any income (43)Taxed only above a limit (8)ALAKAZARCACOCTDEDCFLGAHIIDILINIAKSKYLAMEMDMAMIMNMSMOMTNENVNHNJNMNYNCNDOHOKORPARISCSDTNTXUTVTVAWAWVWIWYPostal abbreviations, alphabetical. TheDistrict of Columbia is counted as ajurisdiction, which is why the total is 51 andnot 50.Being in the second group does not mean thebenefits are taxed – it means the exemptionstops at an income or age line. This guide’sown table gives the exact figures.Counted from Clear Money Guide’s 2026 51-jurisdictionretirement-tax table, where every row carries its statutecitation. Table read 2026-08-17.
Montana is one of 8 jurisdictions that exempt Social Security only up to an income or age limit; the other 43 do not tax benefits at any income level in 2026. Montana’s rule is in the table on this page: benefits are taxed to the extent they are federally taxable; all 51 rules: the 51-state table.

Montana vs. common alternatives

StateSocial SecurityPension / 401(k) / IRAEstate taxInheritance tax
MontanaTaxed to the federally taxable extentFully taxable; $5,660 subtraction at 65+ (TY2025, indexed)NoneNone
IdahoNot taxedFully taxable at flat 5.3% (narrow gov-plan deduction)NoneNone
WyomingNot taxedNot taxed (no income tax)NoneNone
South DakotaNot taxedNot taxed (no income tax)NoneNone

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.

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.

Figures verified against MCA 15-30-2103, 15-30-2120, 72-3-631 and 72-3-1101, the Montana Department of Revenue pages and the 2025 Montana Form 2 instructions on September 30, 2026; the 2026 inflation-indexed senior subtraction, the legislative bill numbers, the no-estate-tax statement, the comparison-state rows and the SEC roster figures were not re-checked.

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