Active-duty pay
Taxed
Active-duty pay taxable; combat zone exempt.
State Guide · MT
Montana — Military Tax Treatment
Montana's military retirement exemption is very small and income-tested — most military retirees won't qualify for more than a token deduction. Montana taxes Guard and active duty pay fully.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable Montana income.
Military retirement pay
Partially Exempt
Pension exclusion up to approximately $5,500 for lower-income retirees; phases out at higher incomes. Verify current amounts with Montana DoR.
The numbers · verified for tax year 2025
Top marginal rate
5.9%
Retirement-pay exemption
Conditional
Military retirement is taxed as ordinary income, but the Working Military Retirement Exemption lets a qualifying resident subtract the lesser of 50% of military retirement pay or their Montana-source earned income, for five consecutive years (Form WMRE). SB93 removes the 5-year limit beginning 2026.
Standard deduction
Montana eliminated its own standard deduction in 2024 and now starts from federal taxable income ($15,750 single / $31,500 MFJ for 2025). Two-rate system topping at 5.9%.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Montana included.
Survivor Benefit Plan (SBP)
Follows retirement
SBP annuities are subject to the same limited pension exclusion rules. Verify with Montana DoR.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Montana, Montana cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Montana can keep Texas as their tax domicile and avoid Montana state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Montana exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Montana's pension exclusion is means-tested — verify you qualify before claiming
- 02Montana Form 2 for state income tax — limited military-specific deductions
Veteran-specific tax benefits
Disabled veteran property tax assistance.
Official authority
https://mtrevenue.gov/ ↗State tax law changes annually. Verify current rules with the Montana Department of Revenue before making any tax decision.
Montana military tax — common questions
Does Montana tax military retirement pay in 2026?
Montana partially taxes military retirement pay. Pension exclusion up to approximately $5,500 for lower-income retirees; phases out at higher incomes. Verify current amounts with Montana DoR.
Does Montana tax active-duty military pay?
Montana taxes active-duty military pay for state residents. Active-duty pay taxable; combat zone exempt. Under the SCRA, Montana can only tax the military pay of service members who are legally domiciled in Montana — not those merely stationed there.
Does Montana tax National Guard and Reserve drill pay?
Montana taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable Montana income.
Is VA disability compensation taxed in Montana?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Montana — taxes it as income.
If I'm stationed in Montana but claim another state, can Montana tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Montana cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides