How Montana taxes retirement income
Montana does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are partly taxed (there is an exclusion, then the rest is taxed). Social Security: taxable to the extent included in federal taxable income (Montana follows the federal inclusion formula; no separate state-only exclusion). Pensions/401(k)/IRA withdrawals: taxed as ordinary income, with a $5,500 subtraction available to taxpayers age 65+ (post-2024 reform consolidated the old larger pension exemption into this smaller flat senior subtraction). Working military retirees (and survivor-benefit recipients) may additionally exempt up to 50% of military retirement income, capped at their Montana-source wage/business/farm income. Railroad retirement (Tier I/II) is fully exempt under federal law.
Retirement income tax in Montana, at a glance
| Income type | Taxed by Montana? |
|---|---|
| Social Security | Yes |
| Pensions | Partially (exclusion applies) |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | None |
| Avg. property tax rate | 0.61% of home value |
Does Montana tax Social Security benefits?
Yes, Montana taxes some Social Security income.
Does Montana tax pensions and 401(k) or IRA withdrawals?
Partly. Social Security: taxable to the extent included in federal taxable income (Montana follows the federal inclusion formula; no separate state-only exclusion). Pensions/401(k)/IRA withdrawals: taxed as ordinary income, with a $5,500 subtraction available to taxpayers age 65+ (post-2024 reform consolidated the old larger pension exemption into this smaller flat senior subtraction). Working military retirees (and survivor-benefit recipients) may additionally exempt up to 50% of military retirement income, capped at their Montana-source wage/business/farm income. Railroad retirement (Tier I/II) is fully exempt under federal law.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Montana taxation of retirement income (Social Security, pensions, 401(k)/IRA): Montana Department of Revenue / Taxation.