Montana
Reviewed October 2026Federal §453 conformity
Yes — Montana starts from the federal return and taxes installment gain as payments arrive, and since the 2024 restructuring it does something few states do: capital gains get their own preferential rate schedule, topping near 4.1%, while ordinary income tops at 5.65% (5.4% starting in 2027 under HB 337 (2025)). Every installment payment therefore splits for Montana purposes the way it does federally — gain at the preferential rate, interest at the ordinary rate — a structure Montana's system now mirrors instead of flattening.
Nonresident sourcing
Gain from Montana real estate or a business operating here — ranch and recreational land owned from out of state being the recurring pattern — is Montana income for sellers anywhere, at the preferential rate. Intangible gain generally follows the seller home.
Withholding
Montana imposes no closing-table withholding on nonresident real estate sellers. Pass-throughs handle nonresident owners through withholding or composite filings each recognition year unless the PTE election covers it.
Selling, then moving (residency change)
Montana-source gain stays taxable here after a move; other gain travels with the seller, and no rule accelerates deferred gain at the border. Resort-town arrivals from high-tax states get the standard caution: the old state's auditors care about the move more than Montana does.
Pass-through entity (PTE) tax election
Montana's PTE election taxes the entity with owner credits, on annual terms. One structural note: the entity pays at the top ordinary rate on gain the owners would have paid the lower capital gains rate on, but Montana refunds the excess to the owners through a refundable credit — so the question is cash-flow timing and the size of the federal deduction, not a lost preference.
Estate and IRD
Montana has no estate or inheritance tax. At death the federal rules apply — heirs pay income tax as payments arrive, with the gain component keeping its preferential Montana rate in the successors' hands.
Planning notes
Montana's list: model the two rate schedules separately — gain near 4.1%, interest at 5.65% (5.4% from 2027) — verify the year's brackets under HB 337, screen the PTE election against the preference, and give ranch sellers the standard sourcing and (for arrivals) origin-state domicile care.
Since 2024, Montana taxes long-term capital gain on its own preferential schedule (topping near 4.1%) while ordinary income tops at 5.65% (falling to 5.4% in 2027 under HB 337). Each installment payment's gain and interest components carry different Montana rates — model them separately, the way the federal return already does.
Educational information, current as of the October 2026 review. State law changes; confirm treatment with a qualified advisor before structuring a transaction.
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