Does Montana Tax Retirement Income?

Partly. Montana taxes some Social Security benefits, subject to an exclusion or age rule.

Whatever portion of Social Security is taxable on the federal return, up to 85%, is taxable in Montana. Montana no longer runs its own Social Security worksheet.

The Montana answer is separate from the federal one. Depending on combined income, up to 85% of Social Security benefits can be taxable on the federal return regardless of what Montana does, so the state rule changes the state line only. Our guide to states that do not tax Social Security shows where Montana sits among the states that still tax benefits.

Partly. Montana taxes some pension income, subject to an exclusion or age rule.

Public and private pensions are fully taxable. The old partial pension and annuity exemption was repealed when Montana moved to a federal-taxable-income starting point in 2024.

Taxpayers 65 and older subtract a flat amount from federal taxable income: $5,660 for 2025 ($11,320 on a joint return if both spouses are 65 or older), indexed annually, so the 2026 figure should be slightly higher. It applies regardless of income and regardless of whether the income is a pension, an IRA, or wages.

Public and private pensions, annuities, and retirement-plan distributions do not always get the same treatment. The pension comparison lists which states exempt pensions broadly, partly, or only for certain plans.

Partly. Montana taxes some traditional 401(k) and IRA withdrawals, subject to an exclusion or age rule.

Traditional 401(k) and IRA withdrawals are taxed as ordinary income at 4.7% or 5.65%. Net long-term capital gains inside a taxable account get a lower Montana rate, but retirement-account withdrawals never do.

Two timing points matter in Montana. A Roth conversion is taxable in the year it is done, and Montana starts from federal adjusted gross income, so a large conversion can land in a year when the state exclusion does not cover it. Qualified Roth withdrawals later are generally not taxable at either level. Required minimum distributions follow the same Montana rules as any other traditional-account withdrawal.

Every state page on this site runs the same retiree profile so the states can be compared: $30,000 of Social Security, $40,000 withdrawn from a traditional 401(k), and a $20,000 private pension, $90,000 in total.

A single 68-year-old with $30,000 of Social Security, $40,000 from a 401(k), and a $20,000 private pension carries roughly $61,000 of federal taxable income into Montana, since 85% of the Social Security is taxable federally. After the age-65 subtraction of roughly $5,700, Montana taxes about $55,000 and the bill is roughly $2,700.

Federal AGI is about $85,500 ($60,000 of retirement income plus $25,500 of taxable Social Security). Subtracting the 2026 federal standard deduction of $18,150 for a single filer age 65 and the federal $6,000 senior deduction, if it applies at this income, gives federal taxable income of roughly $61,350, which is Montana's starting point. The age-65 subtraction of roughly $5,700 brings Montana taxable income to about $55,700; the first $47,500 is taxed at 4.7% (about $2,230) and the remaining $8,200 at 5.65% (about $460), for roughly $2,700 of Montana tax. Contrast: a $150,000 lump-sum IRA withdrawal in the same year is taxed entirely at 5.65%, adding roughly $8,500 of Montana tax, and it also wipes out the federal senior deduction, which raises the Montana starting figure further.

The same $90,000 profile looks different a state line away. The rows below come from the reviewed 51-state table; each state name links to its own guide.

• Wyoming: has no individual income tax at all.
• Idaho: treats Social Security as exempt, pensions as partially taxed, and 401(k) and IRA withdrawals as taxed, with a top rate of 5.30% and deduction for certain public pensions.
• South Dakota: has no individual income tax at all.

Montana is often listed with states that "partially exempt" retirement income because of the age-65 subtraction and the pre-2024 pension exemption. After the 2024 rewrite, the practical reality is that nearly every retirement dollar is taxed and the subtraction is worth a few hundred dollars.

Military retirement: Military retirement pay is taxable, with one targeted exemption. A retiree who became a Montana resident after June 30, 2023, or who began receiving military retirement while already a resident, can exclude the lesser of 50% of military retirement pay or their Montana wage, business, or farm income, for five consecutive years. A retiree with no Montana earned income gets nothing from it. See the military retirement tax map for every state's treatment.

Estate and inheritance tax: Montana has no estate or inheritance tax.

Selling a home or investments in Montana: retirement-income rules do not cover capital gains. See Montana capital gains tax before selling appreciated property or a brokerage position in the year you move or retire.

• Confirm the exclusion you are claiming. Taxpayers 65 and older subtract a flat amount from federal taxable income: $5,660 for 2025 ($11,320 on a joint return if both spouses are 65 or older), indexed annually, so the 2026 figure should be slightly higher. It applies regardless of income and regardless of whether the income is a pension, an IRA, or wages.
• Part-year residents. If you moved into or out of Montana during the year, retirement income is generally allocated to the period of residency, and the former state may still tax distributions received before the move. Document the move date, the new domicile, and where each distribution was received.
• Withholding and estimates. Pension and IRA custodians often withhold federal tax but not Montana tax. If Montana taxes any part of your retirement income, check whether quarterly estimated payments are needed to avoid an underpayment penalty.
• Federal side. The federal return has its own rules: up to 85% of Social Security can be taxable, the temporary $6,000 federal senior deduction is available for 2025 through 2028 subject to income limits, and Roth conversions are taxed in the conversion year. State exemptions do not change any of that.
• Large one-time distributions. Because Montana starts from federal taxable income, every federal deduction reduces Montana tax too. Managing withdrawals so federal modified AGI stays under the $75,000 phase-out for the federal senior deduction during 2025 through 2028 lowers both returns at once.

Comparing states before a move? Use the retirement taxes by state table and the moving states tax guide, and read retirement tax planning for how distributions, conversions, and a move are sequenced together.