Montana
Reviewed July 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%. 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: confirm how the entity-level computation treats the capital gains preference before electing in a sale year, so the election doesn't tax at ordinary rates what the owners would have paid the preferential rate on.
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% — verify the young restructuring's parameters each year, 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%. 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 July 2026 review. State law changes; confirm treatment with a qualified advisor before structuring a transaction.
← Back to State Tax Center