Montana Cuts Its Top Income Tax Rate to 5.65% for 2026
More taxable income now falls within the 4.70% bracket, while the rate on income above it drops from 5.90% to 5.65%.
Montana begins 2026 with a lower top individual income tax rate and a larger share of income taxed at its lower rate. The top rate falls from 5.90% to 5.65%, while the 4.70% bracket expands to cover the first $47,500 of taxable ordinary income for single filers and $95,000 for married couples filing jointly.
The changes took effect January 1 under House Bill 337, signed by Governor Greg Gianforte on April 28, 2025. The Montana Department of Revenue (DOR) outlined the new brackets in its November guidance. Montana still has two ordinary-income tax rates, with separate rates for net long-term capital gains.
More Income Falls Within the 4.70% Bracket
The table below compares the 2025 and 2026 taxable ordinary income limits for Montana's lower tax bracket by filing status. The rate remains 4.70%, but the amount of income covered by that rate more than doubles for each filing status.
| Filing Status | 2025 | 2026 |
|---|---|---|
| Single or Married Filing Separately | Up to $21,100 | Up to $47,500 |
| Married Filing Jointly or Qualifying Surviving Spouse | Up to $42,200 | Up to $95,000 |
| Head of Household | Up to $31,700 | Up to $71,250 |
For a single filer, the higher limit moves an additional $26,400 of taxable ordinary income into the 4.70% bracket. That portion was previously taxed at 5.90%. Only income above the new $47,500 limit is taxed at the higher rate, which falls to 5.65% for 2026.
How Much Do the Two Changes Save?
Together, the wider lower bracket and reduced top rate lower the tax at both income levels shown below. The examples compare single filers with the same Montana taxable ordinary income in 2025 and 2026, excluding net long-term capital gains and tax credits. Dollar amounts are rounded to the nearest dollar, and savings percentages use the amounts before rounding.
| Taxable Income | 2025 | 2026 | Savings | Savings % |
|---|---|---|---|---|
| $80,000 | $4,467 | $4,069 | $398 | 8.9% |
| $160,000 | $9,187 | $8,589 | $598 | 6.5% |
At $80,000 of taxable income, the two changes reduce state income tax by about 8.9% compared with 2025. At $160,000, the dollar savings are larger, but represent a smaller 6.5% reduction.
For the $80,000 example, the wider lower bracket saves $316.80. The lower top rate saves another $81.25 on the remaining $32,500, for a total of $398.05. The savings therefore come from both changes, not just the 0.25 percentage-point reduction in the top rate.
The Earned Income Tax Credit Also Increases
House Bill 337 doubles Montana's earned income tax credit from 10% to 20% of the federal credit beginning in 2026. For an eligible taxpayer with a $1,000 federal earned income tax credit, the state credit would be $200 instead of $100. This credit is separate from the rate-and-bracket savings shown above.
Which Tax Year Uses the New Rates?
The new brackets and 5.65% top rate apply to the 2026 tax year, with calendar-year returns generally filed in 2027. Looking ahead to 2027, another scheduled change lowers the top rate to 5.40% and expands the lower bracket further.
The Montana Department of Revenue has also updated its wage withholding guidance and Form MW-4 for 2026. Employees can review their withholding so the new rates are reflected in payments made throughout the year.
Our state income tax rates hub compares Montana with other states. For available Form 2 returns and instructions, visit our Montana income tax forms page and select the edition for the tax year you are filing.
References:
- House Bill 337, Chapter 227. 2025 enacted legislation, Sections 1-6. Rate and bracket changes, earned income tax credit increase, and effective dates. Montana Legislature. Retrieved September 24, 2026.
- HB337: 2026-2027 Montana Individual Income Tax Changes. November 14, 2025. Ordinary-income brackets, separate capital-gains treatment, and the state earned income tax credit. Montana Department of Revenue. Retrieved September 24, 2026.
- 2025 Montana Tax Tables and Deductions. Official 2025 ordinary-income rates and indexed thresholds used for the comparison. Montana Department of Revenue. Retrieved September 24, 2026.
- Updated Montana Wage Withholding Tables and MW-4 Now Available. December 8, 2025. Employer guidance and employee withholding changes for January 1, 2026. Montana Department of Revenue. Retrieved September 24, 2026.
- Governor Gianforte Celebrates Largest Income Tax Cut in State History. April 28, 2025. Signing announcement for House Bill 337. Office of Governor Greg Gianforte. Retrieved September 24, 2026.