Montana 2025 Tax Update: Rates, Capital Gains, and HB 337 Changes

(MONTANA) Montana’s 2025 state income tax rules are now set, and the next round of changes under House Bill 337 (HB 337) is already baked in for tax years 2026 and 2027. For many immigrants and newcomers, that matters for two reasons: it changes how much cash stays in your pocket, and it affects how clean and consistent your tax record looks when an immigration officer later asks for proof you followed the law.

For 2025, Montana keeps a two‑bracket income tax system with 4.7% and 5.9% rates on ordinary income, plus lower rates on long‑term capital gains. Under HB 337—signed by Governor Greg Gianforte on April 28, 2025—Montana widens the lower bracket starting in 2026, cuts the top rate to 5.65% in 2026 and 5.4% in 2027, and doubles the state earned income tax credit (EITC) to 20% of the federal credit beginning in 2026.

According to analysis by VisaVerge.com, these scheduled changes can be most noticeable for households whose income sits near the old bracket cutoffs, because more of their income will fall into the 4.7% layer.

Step 1: Confirm what tax year you’re dealing with (and why the calendar matters)

A tax year is the income you earn from January 1 through December 31.

• Tax year 2025 income gets reported on the return you file in 2026, generally due April 15, 2026.
• Tax year 2026 income gets reported on the return you file in 2027.
• Tax year 2027 income gets reported on the return you file in 2028.

HB 337’s income‑tax changes begin January 1, 2026, with another round effective January 1, 2027. That timing is why the law is often described as locked in for tax years 2026 and 2027, even though most people won’t “feel” it until they file later.

Key point: changes take effect for the tax year when income is earned, not the year you file.

Step 2: Work out your Montana filing footing—resident, part‑year, or nonresident

Montana tax filing depends on whether you are treated as a Montana resident for tax purposes and whether your income is Montana‑source. This can differ from your federal tax status and your immigration status.

In practical terms:

• Montana residents generally report all income (with state adjustments).
• Nonresidents generally report only Montana‑source income (for example, wages earned in Montana or income from Montana property).
• Part‑year residents usually report what they earned while living in Montana, plus Montana‑source income.

For immigrants, visa holders, and international students, it’s common to have a “split story”: you may be a federal nonresident for tax while still having Montana wages and a Montana filing requirement.

If you aren’t sure, start with the Montana Department of Revenue’s individual income tax landing page, which collects official instructions and yearly updates in one place: the Montana Department of Revenue’s individual income tax resources.

Step 3: Know the 2025 rates before you plan for HB 337

For tax year 2025, Montana uses two brackets for ordinary income (income that is not net long‑term capital gains). The rates are:

• 4.7% on taxable income up to your filing‑status threshold
• 5.9% on taxable income above that threshold

The 2025 thresholds by filing status:

This is a progressive system: if you pass the threshold, you do not pay the top rate on every dollar—only on the dollars above the cutoff.

2025 long‑term capital gains, and why immigrants should separate them carefully

Montana also taxes long‑term capital gains (assets held more than one year) at lower rates:

• 3.0% and 4.1%, with thresholds tied to the ordinary‑income brackets.
• The 3.0% portion applies only to the amount that “fits” under the bracket threshold after counting your ordinary income; once you’re past that cutoff, gains are taxed at 4.1%.

This is where records matter. If you sold stock to pay for immigration legal fees or a move, keep brokerage statements and closing documents so you can show what was long‑term versus short‑term.

Step 4: Track what HB 337 changes in 2026 and 2027 (brackets, rates, and refunds)

HB 337 maintains the two‑bracket approach but changes the width of the lower bracket and lowers the top rate.

Tax year 2026 brackets under HB 337

For tax year 2026, taxable income (excluding long‑term capital gains) is taxed at:

• 4.7% on:
  • Married Filing Jointly & Surviving Spouse: $1–$95,000
  • Head of Household: $1–$71,250
  • Single & Married Filing Separately: $1–$47,500
• 5.65% above those amounts

Two big takeaways: the lower bracket expands sharply compared with 2025, and the top marginal rate drops from 5.9% to 5.65%.

Tax year 2027 brackets under HB 337

For tax year 2027, the lower bracket expands again and the top rate drops again:

• 4.7% on:
  • Married Filing Jointly & Surviving Spouse: $1–$130,000
  • Head of Household: $1–$97,500
  • Single & Married Filing Separately: $1–$65,000
• 5.4% above those amounts

Long‑term capital gains rates remain 3.0% and 4.1% in 2026–2027, but the thresholds used to apply them track the wider ordinary‑income brackets.

The Montana EITC doubles starting in 2026

HB 337 doubles the Montana earned income tax credit:

• Starting tax year 2026, the Montana EITC equals 20% of the federal EITC (up from 10%).

For many working families—including many immigrant families with work authorization—this can increase refunds. Governor Gianforte’s office has estimated HB 337 will return over $750 million in permanent income‑tax cuts once fully in place.

Important: the EITC change is effective for income earned in 2026 and shows up on returns filed in 2027.

Step 5: Map the filing journey for a newcomer, with timeframes and checkpoints

Here’s a practical “year in the life” for someone who arrives in Montana in 2025 on a work visa, gets paid wages, and needs to file properly.

January–December 2025: collect proof as you earn

As you work, build a simple folder (digital is fine) for:

• Pay stubs and your year‑end W‑2
• Any 1099 forms
• Records of moving expenses that might matter for budgeting (even if not deductible)
• Brokerage statements if you sold assets (capital gains)

If you have a spouse abroad or family members with different status, keep notes on who lived with you and when. Household details affect filing status and some credits.

January–April 2026: prepare and file the 2025 return

Your 2025 Montana return is generally due April 15, 2026. You may request more time to file, but any tax due still needs to be paid by that deadline to avoid interest and penalties.

If you don’t have a Social Security number and you can’t get one, you may need an Individual Taxpayer Identification Number (ITIN). The ITIN application is federal, using IRS Form W‑7. Use the official IRS instructions and form package here: IRS Form W-7, Application for IRS Individual Taxpayer Identification Number. Once issued, you use that number on your Montana return.

2026–2027: plan around the HB 337 bracket changes

If you expect your income to rise, HB 337’s wider 4.7% bracket for tax year 2026 and again for tax year 2027 may mean less of your income is exposed to the higher rate. For immigrants saving for immigration costs—medical exams, filing fees, translations, travel—steady after‑tax cash flow can be the difference between filing on time and delaying a case.

Step 6: Keep your tax record “immigration‑ready”

In many immigration cases, officers ask for tax returns or IRS transcripts to check whether you’ve followed the law and to confirm income history. That can come up in green card cases, naturalization, and sponsorships.

Practical habits that help:

• File on time, or file an extension and still pay by the deadline.
• Keep copies of both federal and Montana filings, plus proof of payment.
• Don’t guess on residency; if you’re part‑year or have Montana‑source income only, file accordingly.
• If your status or work permission changes mid‑year, treat your return carefully—part‑year reporting is common.

Step 7: Don’t confuse income tax changes with property tax changes

Montana also passed property tax bills HB 231 and SB 542, which reshape how primary homes and second homes are taxed starting in 2026. Rules described include distinctions between primary residences and second homes, and a long‑term rental definition of 28+ days for at least 7 months per year.

Early projections mentioned qualifying owner‑occupied homes averaging 18% lower than 2024 by 2026, while non‑qualifying properties could rise, with a cited flat 1.90% rate for some categories.

These property tax shifts do not change the 2025 income tax rates, but they can change the real cost of settling in Montana—especially for newcomers deciding whether to rent long‑term or buy.

Step 8: A simple checklist you can use each year

• Confirm your filing status (single, joint, head of household, surviving spouse).
• Separate ordinary income from long‑term capital gains.
• Apply the right bracket table for the tax year (2025 vs. 2026 vs. 2027).
• Watch the Montana EITC rule change starting in 2026 (20% of the federal credit).
• Store records so you can provide them to an immigration lawyer or officer if asked later.

Final takeaway: HB 337 shapes after‑tax cash flow and refund size for 2026–2027, and maintaining clear, timely tax records is critical for immigration processes.