What Changes in Your Paycheck in Montana
Your paycheck in Montana shows a Montana state income tax line item that grows progressively through seven brackets, starting at 1% for the first $1-$1. For a $1 salary, you might see ~ $1-$1 annually (~ $1-$1 per biweekly paycheck) for state tax, reflecting the progressive brackets with effective rates around 5.5%-6%. Montana paychecks only show state and federal tax deductions—no local income tax line items. The progressive brackets mean your state tax increases as you move through brackets, with higher earners reaching the 6.75% top rate. The lack of sales tax means you won't pay state sales tax on purchases, but your income tax may be higher than in some other states Retirees see no state tax on retirement income distributions.
Example State Tax in Montana
What you'll pay in Montana state income tax at different salary levels (single filer, no deductions):
| Gross Salary | State Tax (Year) | Effective Rate |
|---|---|---|
| $50,000 | $2,721 | 5.4% |
| $75,000 | $4,408 | 5.9% |
| $100,000 | $6,096 | 6.1% |
| $150,000 | $9,471 | 6.3% |
Use the calculator above to see your exact take-home pay with your filing status and deductions.
Key Facts That Affect Your Take-Home Pay
- Montana uses a progressive income tax system with seven brackets, starting at 1% for the first $1 of income (single) or $1 (married) and escalating through incremental brackets to a top rate of 6.75% for income above $1 (single) or $1 (married), making Montana's bracket structure relatively simple with compressed brackets at low income levels.
- Montana's progressive brackets are compressed at the bottom, meaning the first six brackets cover only the first $1-$1 of income (depending on filing status), so most middle and high earners quickly reach the top 6.75% rate. For a $1 earner, ~ $1-$1 of income is taxed at 6.75%, making the effective rate around 5.5%-6%, not the top 6.75% rate.
- Montana does not levy city or county income taxes, meaning the same tax rules apply throughout the state. All Montana residents have the same income tax structure—only the state progressive brackets apply.
Is Montana Better for You?
Montana works well for:
Montana works best for big spenders who benefit from no state sales tax, lower and middle-income earners (under ~ $1 for singles, $1 for couples) who benefit from the progressive brackets with lower starting rates (1%-6%). At these income levels, effective state tax rates are 3%-5%, which can be competitive with or lower than some flat-tax states when factoring in the lack of sales tax Retirees also benefit from exemptions on Social Security and most retirement income, making Montana attractive for those relying on retirement savings.
Montana may not be ideal if:
Montana is challenging for high earners (~ $1+ for singles, $1+ for couples) because they quickly reach the top 6.75% rate. Someone earning $1 in Montana pays an effective rate around 5.5%-6% (~ $1-$1 annually), while the same earner in a flat-tax state like Pennsylvania would pay $1 (3.07% flat, though PA may have local EIT), and in North Carolina would pay $1 (4.75% flat). High earners with geographic flexibility save $1-$1+ annually by moving to lower-tax states, even accounting for the lack of sales tax.
Common Mistakes People Make
Misconception: 'Progressive tax means I'll pay the top 6.75% on all my income in Montana.' Reality: Montana's progressive system starts at just 1% for the first $1-$1 of income (depending on filing status), and most middle-income earners pay effective rates around 5%-6%, not 6.75%. The 6.75% rate only applies to income above $1 (single) or $1 (married). Someone earning $1 pays an effective rate around 5.5%-6% (~ $1-$1 annually).
Misconception: 'Montana has low taxes because it's a rural state.' Reality: While Montana's top income tax rate (6.75%) is moderate, the compressed brackets mean most earners quickly reach higher rates. A $1 earner pays an effective rate around 5.5%-6%, while the same earner in a flat-tax state like Pennsylvania would pay $1 (3.07% flat, though PA may have local EIT). However, Montana's lack of sales tax benefits spenders, and the top 6.75% rate is competitive with many states.
Misconception: 'Montana's tax structure is the same as other states with no sales tax.' Reality: Montana is one of only five states with no sales tax (along with Alaska, Delaware, New Hampshire, and Oregon). This creates a unique revenue model where Montana relies more heavily on income tax (progressively higher rates up to 6.75%) and property taxes. Unlike zero-income-tax states like Texas or Florida that rely on sales/property taxes, Montana taxes income progressively while exempting sales transactions from taxation.
One Thing to Know
Montana is one of only five states with no sales tax, which benefits big spenders, but the state compensates with progressive income tax rates up to 6.75%. Many people moving to Montana for the 'no sales tax' benefit are surprised to find their income tax burden is actually higher than in some sales-tax states.
Important Notes
These calculations are estimates based on current tax law. Your actual take-home pay varies based on:
- Pre-tax deductions (401(k), health insurance, HSA, etc.)
- Your W-4 withholding elections
- Additional income or deductions at tax time
- Individual circumstances and tax situations
Tax rates are subject to change. Federal and state tax laws may be updated annually. This is not tax advice. For personalized help, consult a tax professional familiar with Montana tax laws.