Overview of Montana Taxes
Montana has a progressive income tax system comprising seven income brackets with rates ranging from 1.00% to 6.75%. All taxpayers in Montana are subject to the same brackets regardless of their filing status. No cities in the state levy local income taxes.
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Montana Paycheck Calculator
Montana Paycheck Quick Facts
- Montana income tax rate: 1.00% - 6.75%
- Median household income: $66,341 (U.S. Census Bureau)
- Number of cities that have local income taxes: 0
How Your Montana Paycheck Works
If you are legally employed in the Treasure State, you can expect your employer to withhold FICA taxes and federal income taxes from your paychecks. Medicare and Social Security taxes together make up FICA taxes. You pay into these systems now so you can receive the benefits when you are retired. You pay 1.45% of your wages in Medicare tax and 6.2% in Social Security tax. Your employer matches your contribution. Keep in mind if you are self-employed, you are responsible for paying the total 2.9% in Medicare tax and 12.4% in Social Security tax yourself, though you can deduct half that payment.
However, certain wages are also subject to the Additional Medicare Tax. For single filers, heads of household and qualifying widow(er)s, any wages in excess of $200,000 are subject to the 0.9% Medicare surtax, which your employer does not match. This threshold is $250,000 if you're married and file jointly or $125,000 if you're married and file separately.
How much gets withheld in federal income tax varies from person to person and is dependent on a number of factors including your salary, your marital status and whether you have opted to have additional tax withheld from your paycheck. Your employer looks to the information that you provide on your W-4 form to determine how much should be taken out of your paycheck for taxes.
The IRS made significant changes to the Form W-4 in recent years. The new document removes the use of allowances, along with the option of claiming personal and dependency exemptions. It requires filers to enter annual dollar amounts for income tax credits, non-wage income, itemized and other deductions and total annual taxable wages. The form also uses a five-step process that allows filers to enter personal information, claim dependents and indicate any additional income or jobs.
Besides FICA taxes and federal taxes, you can elect to have additional money withheld from your paycheck. If you have employer-sponsored health or life insurance, you save money for retirement in a 401(k) account or you contribute to a flexible spending account, the money you put into these benefits will all be subtracted from your salary before it hits your bank account.
Montana’s state income tax system is progressive, meaning high earners are taxed more than low earners. The tax brackets in Montana are the same for all filers regardless of filing status. The first $3,600 you earn in taxable income is taxed at 1.00%. The rate jumps to 2.00% on income between $3,600 and $6,300; 3.00% on income up to $9,700; 4.00% up to $13,000; 5.00% up to $16,800; 6.00% up to $21,600; and 6.75% on taxable income over $21,600.
No Montana cities levy local income taxes, so taxpayers only have to worry about state and federal taxes. If you’re planning a move to the Big Sky State or otherwise looking to get a mortgage in the state, take a look at our Montana mortgage guide for everything you need to know about the mortgage process there.
A financial advisor can help you understand how taxes fit into your overall financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How You Can Affect Your Montana Paycheck
If you are looking to pay less in taxes in Montana and you don’t mind receiving smaller paychecks, you can contribute more money to a retirement account, like a 401(k) or 403(b). Not only are you putting money away that you can enjoy down the road, but since money that goes into a retirement account comes out of your paycheck before taxes are deducted, you are actually lowering your taxable income. That lowers how much you have to pay in taxes.
Along the same lines, you can use pretax money to take advantage of a health savings account (HSA) or flexible spending account (FSA) if your employer offers them. You can pay for medical-related expenses like prescriptions or co-pays from these accounts. Keep in mind that only $610 in an FSA can roll over from 2023 to 2024 and $640 from 2024 to 2025. In other words, you need to actually use whatever you put in your FSA, or you’ll lose those funds.
It might seem counterproductive to opt to receive less money in your paycheck but remember: You are setting aside cash you would spend anyway and avoiding paying taxes on it.
