Montana 2026 Tax Changes — What Residents & Business Owners Must Know
Beginning January 1, 2026, major federal tax changes take effect as earlier provisions expire and updated rules continue.
Montana residents — who pay a state income tax based on federal AGI — will feel these changes directly. Federal adjustments will increase Montana taxable income for many households.
- W-2 earners across Billings, Missoula, Bozeman, Helena, Great Falls, Kalispell
- Outdoor, tourism, and seasonal workers
- Self-employed professionals, contractors, and LLC/S-Corp owners
- Trades and construction workers
- Real estate investors and STR owners
- Ranching and agricultural households
- Families with children
- Retirees drawing IRA or pension income
- Dual-income households
Key Federal Changes Affecting Montana Residents
Standard Deduction Shrinks in 2026
The federal standard deduction is projected to drop:
👉 Impact on Montana
Montana residents — especially families, retirees, and homeowners — will see higher taxable income.
Because Montana uses federal AGI, the deduction reduction also raises Montana state tax.
Federal Tax Brackets Increase
- 12% → 15%
- 22% → 28%
- 24% → 31%
- dual-income earners
- outdoor and tourism workers
- healthcare and education professionals
- retirees drawing taxable income
- households earning between $50K–$200K
Higher federal tax burden increases state taxable income.
QBI (20% Business Deduction) Remains Federal; Montana Does Not Apply It
- Federal taxable income may decrease
- Montana taxable income does not
- Business owners must plan around both sets of rules
- contractors and trades
- tourism and outdoor service businesses
- outfitters and guides
- real estate agents
- LLCs and S-Corps
- self-employed professionals
Child Tax Credit Shrinks
- The federal Child Tax Credit reduces from around $2,000
- To roughly $1,000
- Refundability decreases
Families in Billings, Missoula, Bozeman, and Helena will see smaller federal refunds.
Marriage Penalty Returns
Montana has many dual-income households, particularly near Bozeman, Missoula, and Helena.
- joint filers reach higher federal brackets sooner
- credit eligibility phases out faster
- combined incomes increase federal and Montana taxable income
Couples earning $70K–$180K combined will notice the biggest changes.
Montana-Specific Tax Considerations
1. Montana Uses Federal AGI for State Tax Calculations
- lower federal deductions
- higher federal brackets
- reduced federal credits
…all increase Montana taxable income.
Montana residents should expect a combined federal + state impact.
2. Real Estate & Rental Property Owners Will Feel 2026 Changes
Montana real estate markets — especially in:
- Bozeman
- Missoula
- Kalispell
- Big Sky area
- Helena
- Whitefish
— will be impacted by:
- capital gains changes
- depreciation and cost recovery rule adjustments
- STR participation documentation
- classification of rental income
- timing considerations for sales and refinances
3. Short-Term Rental (STR) Owners Must Prepare for Updated Rules
- Bozeman
- Big Sky
- Whitefish
- Missoula
- Glacier National Park corridor
- Yellowstone region
- reduced bonus depreciation
- stricter STR participation requirements
- updated safe harbor standards
- limits on rental losses
4. Agriculture & Ranching Income Is Impacted
- reduced depreciation on equipment
- treatment of livestock sales
- grain and crop income
- land and equipment capital gains
- operating losses and income averaging
2026 changes directly affect how agricultural income is taxed and planned.
5. Retirement Planning Heavily Influenced by Federal Bracket Increases
Montana taxes many forms of retirement income, including:
- IRA withdrawals
- pensions
- 401(k) distributions
Higher federal brackets increase total tax liability for retirees.
Montana residents relying on investment income also face increased exposure.
Who Is Hit Hardest in Montana (2026)
- Dual-income households
- Trades, manufacturing, and tourism workers
- Business owners and contractors
- Real estate investors and landlords
- STR operators
- Ranching and agricultural households
- Families with children
- Retirees drawing taxable retirement income
- Middle-income earners
What Montana Residents Should Do Before December 31, 2025
- Review federal and state withholding
- Maximize retirement contributions
- Evaluate Roth conversions
- Review business entity structure
- Prepare STR and rental documentation
- Analyze capital gains exposure
- Time equipment or property purchases strategically
- Build a complete 2025–2026 tax strategy
Montana 2026 Tax FAQ
Does Montana conform to QBI?
No — QBI is federal-only.
Will Montana taxes rise?
Rates are unchanged, but taxable income rises due to federal changes.
Are families affected?
Yes — child credit reductions and higher taxable income reduce refunds.
Are STR owners impacted?
Yes — depreciation and participation rules tighten.
Are retirees affected?
Yes — federal bracket increases increase taxes on withdrawals.
Get a 2026 Montana Tax Strategy
A personalized strategy ensures you’re fully prepared before the 2026 rules take effect.