Montana made several taxpayer-friendly updates that continue to simplify filing and expand certain tax benefits. If you're filing a Montana individual income tax return for the 2026 tax year (filed in 2027), here are the key changes to know.
Filing Status Must Match Your Federal Return
Montana requires taxpayers to use the same filing status on their Montana return as they use on their federal return.
For example:
- Single filers must file Single in Montana.
- Married taxpayers filing jointly on their federal return must file jointly in Montana.
- Head of Household and Married Filing Separately statuses must also match the federal return.
This alignment helps reduce confusion and streamlines return preparation.
Montana Filing Requirements Follow Federal Rules
Montana's filing requirements generally mirror the federal filing requirements. If you're required to file a federal income tax return, you'll typically need to determine whether a Montana return is also required based on your residency status and Montana-source income.
529 Plan Contribution Benefits Remain Expanded
Montana continues to allow an increased subtraction for contributions to qualified 529 and 529A savings plans.
For tax year 2026, eligible taxpayers may subtract:
- Up to $4,500 per taxpayer
- Up to $9,000 for Married Filing Jointly taxpayers
To qualify, contributions must be made to:
- Your own account,
- Your spouse's account, or
- An account owned by your Montana resident child or stepchild.
These accounts can be used for qualified education expenses and may provide valuable state tax savings.
Military Retirement Income Subtraction Continues
Montana continues to provide a subtraction for qualifying military retirement income and survivor benefits.
Because the previous expiration date was removed by state law, eligible military retirees and survivors may continue claiming this benefit if they meet the requirements.
If you receive military retirement pay, be sure to review the military retirement section of the Montana return to determine your eligibility.
Net Operating Loss (NOL) Transition Adjustment Carryforwards
Taxpayers who elected Montana's NOL transition adjustment on their 2024 Montana return may continue to use any remaining carryforward amounts.
Key points:
- The adjustment was based on the difference between federal and Montana NOL amounts as of December 31, 2023.
- The election had to be made by October 15, 2025.
- Unused adjustment amounts may be carried forward for up to seven years.
If you previously made this election, retain your records and continue tracking available carryforward amounts each year.
Retirement Income Remains Taxable
Montana's former pension, annuity, and IRA income deduction remains repealed.
As a result, for tax year 2026:
- Pension income is generally taxable.
- Annuity income is generally taxable.
- Traditional IRA distributions are generally taxable to the extent they are taxable federally.
The prior Montana retirement income exclusions that existed before tax year 2024 are no longer available.
What This Means for Most Taxpayers
The most significant Montana tax provisions for 2026 include:
- Matching your Montana filing status to your federal filing status.
- Filing requirements that follow federal rules.
- Continued enhanced 529 plan contribution subtractions.
- Ongoing military retirement income benefits.
- Continued availability of NOL transition adjustment carryforwards for eligible taxpayers.
- No deduction for general retirement income.
These changes continue Montana's effort to align more closely with federal tax rules while preserving certain state-specific benefits for education savings and military families.