Rental Property Taxes in Montana (2026 Guide)

1. Property Tax: Register the Rental for the Lower Rate

This is the single most important Montana landlord fact for 2026. HB 231 and SB 542 (2025 session) rewrote class-four residential property tax (MCA 15-6-134) into a two-track system: a lower homestead / long-term-rental track, and a higher track for everything else (second homes and short-term rentals).

• Qualifying long-term rentals (and principal residences) use a tiered tax rate that runs roughly 0.76% → 0.9% → 1.1% → 1.9% of market value, stepping up as a home's value rises above the statewide median residential value.
• Everything else — second homes and short-term rentals — is taxed at a flat 1.9%, the top tier, with no low-value step-down.

The actual dollar tax also depends on local mill levies and the median residential value the Department recalculates every two years, so your effective rate varies by county — but the homestead-vs-flat-1.9% gap is the lever you control by registering.

2. Income Tax (HB 337, New Brackets for 2026)

Montana runs a two-bracket income tax, and HB 337 (2025 session) reset the brackets and lowered the top rate (MCA 15-30-2103):

• 4.7% on lower-bracket taxable income; 5.65% above the threshold (about $47,500 for single filers in 2026). The top rate steps down again to 5.4% in 2027.
• Montana starts from your federal taxable income and adjusts from there, so an accurate federal return drives an accurate Montana return.

Net rental income lands in this ordinary schedule. SheltrIQ's engine computes the exact liability across both brackets — these figures are the anchor, not a re-derivation.

3. Preferential 3.0-4.1% Capital-Gains Rates

Montana is one of the few states that taxes net long-term capital gains at a lower rate than ordinary income (MCA 15-30-2103). Instead of the 4.7% / 5.65% ordinary schedule, qualifying long-term gains are taxed at 3.0% in the lower bracket and 4.1% above the threshold.

4. Bonus Depreciation: Montana Conforms

Good news for landlords: Montana conforms to federal bonus depreciation (IRC §168(k)). Because the state begins from federal taxable income and its list of adjustments (MCA 15-30-2120) contains no §168(k) add-back, the bonus depreciation you claim federally flows straight through to your Montana return — no separate state depreciation schedule to reconcile.

5. No Transfer Tax, No Sales Tax

Montana has no real-estate transfer (realty transfer) tax — buying or selling a rental costs you nothing at the state level on the transfer itself. Montana also has no general statewide sales tax, so materials, supplies, and most services you buy for the property carry no sales-tax markup. Both are genuine cost advantages over most states.

6. LLC Annual Report ($20)

A Montana LLC files an annual report with the Secretary of State, due April 15, for a $20 fee (sosmt.gov). It is one of the cheaper states to hold rentals in an LLC. File on time — a late annual report adds a penalty and, left unfiled, can lead to involuntary dissolution.

7. Rent Control

Montana preempts local rent control statewide (MCA 7-1-111, added by HB 463 in 2023). No city or county may enact, maintain, or enforce an ordinance controlling the rent charged for private residential or commercial property. You set rents at market.

8. Security Deposit Rules

• No statutory cap on the deposit amount (MCA Title 70, Chapter 25).
• Return within 30 days of the tenant vacating, together with a written itemized statement of any deductions for damage, cleaning, or unpaid rent (MCA 70-25-202).
• 10 days if there are no deductions at all — when nothing is withheld, the full deposit must be returned within 10 days.
• Miss the deadline and you forfeit the deductions — failing to deliver the itemized statement on time means you lose the right to withhold and must return the full deposit.

9. How SheltrIQ Helps Montana Landlords

Montana's 2025 reforms reshaped both the property tax and the income brackets — SheltrIQ keeps your return on the current rules:

• HB 337-current income modeling — applies the 4.7% / 5.65% two-bracket schedule for 2026 from your federal taxable income, not stale rates.
• Preferential capital-gains modeling — taxes the long-term-gain portion of a rental sale at the 3.0-4.1% rates while keeping depreciation recapture at ordinary rates, so disposition math is exact.
• Bonus-depreciation pass-through — applies your federal §168(k) bonus straight to the Montana return, since the state conforms.
• AI Schedule E classification — sorts each expense to the right line so your Montana income starts from an accurate federal return.