State retirement taxes · 2026
Does Montana tax retirement income?
Short answer: Yes, including Social Security. Montana taxes Social Security the same way the federal government does. No pension exclusion — just a $5,660 subtraction per person 65+ (2025) against any income.
What’s taxed in Montana
2026 rules.
- Social SecurityTaxed
- Montana taxes Social Security the same way the federal government does.
- PensionsPartly taxed
- Pensions are taxable; the only relief is a $5,660 subtraction per person 65+ (2025) from any income.
- IRA & 401(k) withdrawalsPartly taxed
- IRA and 401(k) withdrawals are fully taxable; only the general 65+ subtraction reduces them.
- Military retirement payPartly taxed
- Only working military retirees get a break: the lesser of 50% of military retirement pay or their Montana wages and business income, for up to five years. With no Montana earned income, the exclusion is $0.
- Income tax rate5.65% top
- Two rates on ordinary income for 2026: 4.7% up to $47,500 single ($95,000 joint, $71,250 head of household) and 5.65% above — down from 5.9% in 2025.
Does Montana tax Social Security?
Montana taxes Social Security the same way the federal government does.
Since 2024 Montana starts from federal taxable income and has no Social Security subtraction, so whatever part of your benefits is taxable federally is taxable in Montana. The old Montana-specific calculation was repealed. The general 65+ subtraction and the federal $6,000 senior deduction, which flows through, soften the bill.
Your federal return is a separate question — see how much of your benefit the IRS taxes with the taxable Social Security calculator.
Are pensions taxed in Montana?
Pensions are taxable; the only relief is a $5,660 subtraction per person 65+ (2025) from any income.
Public and private pensions are taxed as included in federal taxable income. The partial pension, annuity and IRA exemption was repealed January 1, 2024. Taxpayers 65 and older subtract $5,660 each (2025; $11,320 if both spouses are 65+) from any kind of income, with no income limit. Railroad Retirement benefits are not taxed.
Public vs. private pensions: Treated the same: taxable.
Are IRA and 401(k) withdrawals taxed in Montana?
IRA and 401(k) withdrawals are fully taxable; only the general 65+ subtraction reduces them.
The former partial pension and IRA exemption was repealed from January 1, 2024.
Required minimum distributions (RMDs) are IRA and 401(k) withdrawals, so the same rules apply. Estimate your RMD.
Is military retirement pay taxed in Montana?
Only working military retirees get a break: the lesser of 50% of military retirement pay or their Montana wages and business income, for up to five years. With no Montana earned income, the exclusion is $0.
What is Montana’s income tax rate?
2 brackets, topping out at 5.65%.
Two rates on ordinary income for 2026: 4.7% up to $47,500 single ($95,000 joint, $71,250 head of household) and 5.65% above — down from 5.9% in 2025. For 2027: 4.7% up to $65,000 single ($130,000 joint) and 5.4% above. Long-term capital gains are taxed at 3.0% and 4.1%.
2026 brackets. Each rate applies to taxable income above the amount shown.
| Single | Married, joint | Rate |
|---|---|---|
| $0 | $0 | 4.7% |
| $47,500 | $95,000 | 5.65% |
Standard deduction and exemptions
No separate Montana standard deduction or personal exemption: Montana uses your federal standard deduction (including the 65+/blind add-on) or your federal itemized deductions minus state income tax.
What tax breaks do seniors get in Montana?
The 65+ subtraction ($5,660 per person for 2025, indexed each year). The federal $6,000 enhanced senior deduction flows into Montana taxable income for 2025–2028. The Elderly Homeowner/Renter Credit pays up to $1,150 if you are 62+ with household income under $45,000.
What changed for 2026?
HB 337 (2025): 2026 brackets widened and the top rate cut from 5.9% to 5.65%; the 2027 top rate is 5.4% with wider brackets; the Montana earned income credit rises to 20% of the federal credit from 2026. The 2024 overhaul moved the starting point to federal taxable income and repealed the partial pension and IRA exemption.
2026 and 2027 rates are official (HB 337); the 65+ subtraction shown is the 2025 amount — the 2026 indexed figure is not yet published.
What we couldn’t confirm
- Montana must publish its indexed 2026 age-65 subtraction by November 1, 2026; until then we show the 2025 amount ($5,660).
How Montana compares with its neighbors
Thinking of moving across the line? Here’s how each bordering state treats retirement income in 2026.
- MontanaThis pageLess friendlySocial Security TaxedTop rate: 5.65% top
- IdahoMixedSocial Security Not taxedTop rate: 5.3% flat
- North DakotaFriendlySocial Security Not taxedTop rate: 2.5% top
- South DakotaTax-free retirement incomeSocial Security Not taxedTop rate: None
- WyomingTax-free retirement incomeSocial Security Not taxedTop rate: None
State tax is half the picture — check the federal side
Montana retirement tax questions
Is Montana tax-friendly for retirees?
We rate Montana “Less friendly” for 2026. Montana taxes Social Security the same way the federal government does. No pension exclusion — just a $5,660 subtraction per person 65+ (2025) against any income. The top income tax rate is 5.65%.
Are required minimum distributions (RMDs) taxed in Montana?
RMDs are withdrawals from IRAs and 401(k)-type plans, so they follow Montana’s rules for those accounts. IRA and 401(k) withdrawals are fully taxable; only the general 65+ subtraction reduces them.
Is military retirement pay taxed in Montana?
Partly. Only working military retirees get a break: the lesser of 50% of military retirement pay or their Montana wages and business income, for up to five years. With no Montana earned income, the exclusion is $0.
Why does Montana tax Social Security now?
Since 2024 Montana starts from federal taxable income and repealed its separate Social Security calculation, so the portion of your benefits that is taxable on your federal return is taxable in Montana too. The 65+ subtraction and the federal $6,000 senior deduction (2025–2028) reduce the bill.
Sources for Montana
Primary sources only. We re-check them whenever an agency publishes new figures.
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