Retiring in Montana: what taxes actually cost you
The short answer
On $80,000 of retirement income, Montana costs about $6,104 a year across state income, property and sales tax. That ranks 20 of 51, or $531 below the median state. State income tax alone is $2,784, which is 3.5% of gross income.
Run it on your own numbers
The figures above use a reference profile. Change them and every number on this page moves, including the ranking.
How Montana treats retirement income
Montana runs a graduated income tax from 4.7% to 5.9%, with the top rate starting at $20,500 of taxable income for a single filer.
Social Security
Not taxed
Pension income
Taxed as ordinary income
401(k) and IRA withdrawals
Taxed above $4,640
Capital gains
Taxed at a reduced 4.7%
Property tax
Averages 0.83% of assessed value, so $3,320 a year on a $400K home.
Sales tax
No state sales tax, though local rates may still apply.
Worth knowing: No sales tax. Social Security exempt. Capital gains partially deductible.
Where Montana sits against the rest
The spread across all 51 runs from $3,280 in Wyoming to $14,004 in Connecticut, a difference of $10,724 a year on the same income.
Five cheapest on these numbers
| State | Total tax |
|---|---|
| Wyoming | $3,280 |
| Nevada | $3,639 |
| Colorado | $4,009 |
| Tennessee | $4,310 |
| Louisiana | $4,678 |
Five most expensive on these numbers
| State | Total tax |
|---|---|
| Connecticut | $14,004 |
| New Jersey | $12,953 |
| Vermont | $12,755 |
| Kansas | $11,108 |
| Minnesota | $10,888 |
Worth keeping in proportion. The gap between the best and worst state here is real money, but it is smaller than the gap between two housing markets, and it is far smaller than the effect of your withdrawal rate. Safe withdrawal rate covers that one.
Common questions
Does Montana tax Social Security?
No. Montana does not tax Social Security benefits at the state level. Federal tax on benefits still applies depending on your combined income.
How much tax would a retiree pay in Montana?
On $80,000 of retirement income with a $400,000 home and $70,000 of annual spending, Montana works out at roughly $6,104 a year across income, property and sales tax. That ranks 20 of 51, against a median of $6,635.
Does Montana tax 401(k) and IRA withdrawals?
Yes, above an exemption. Montana allows $4,640 of retirement income to be excluded. Withdrawals above that are taxed as ordinary income.
Is Montana a good state to retire in for taxes?
Around the middle of the pack. On the reference profile it costs $531 less than the median state, and $2,824 more than Wyoming, which is the cheapest. Tax is one input though. Cost of living, housing and proximity to family usually move a retirement budget further than the tax code does.
Retirement taxes in another state
Related: Taxes in retirement, Withdrawal order, Roth conversions, All 51 states.