Overview of Montana Taxes
Montana has a progressive income tax system with seven income brackets that boast rates ranging from 1.00% to 6.90%. 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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- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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Montana Paycheck Calculator
Montana Paycheck Quick Facts
- Montana income tax rate: 1.00% - 6.90%
- Median household income: $52,559 (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. Any wages you have in excess of $200,000 are subject to a 0.9% Medicare surtax, which your employer does not match. 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.
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.
Note that withholding calculations changed slightly from 2017 to 2018 because of the tax plan that President Trump signed into law in December 2017. The IRS released updated tax withholding guidelines in January 2018, and taxpayers should have seen changes to their paychecks following that. If you didn’t double check your withholdings at that time, it’s a good idea to look over your W-4 to ensure it's still correct.
The IRS has made significant changes to the Form W-4 for 2020. 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. In 2020, these updates will primarily affect those adjusting their withholdings or changing jobs. Employees hired before 2020 aren't required to fill out the new form. The tax return you file in 2021 will contain any adjustments you make in 2020.
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 Median Household Income
|Year||Median Household Income|
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 $3,100 you earn in taxable income is taxed at 1.00%. The rate jumps to 2.00% on income above $3,100 and up to $5,400; 3.00% on income up to $8,200; 4.00% up to $11,100; 5.00% up to $14,300; 6.00% up to $18,400; and 6.90% on taxable income over $18,400.
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.
Income Tax Brackets
|Montana Taxable Income||Rate|
|$0 - $3,100||1.00%|
|$3,100 - $5,400||2.00%|
|$5,400 - $8,200||3.00%|
|$8,200 - $11,100||4.00%|
|$11,100 - $14,300||5.00%|
|$14,300 - $18,400||6.00%|
A financial advisor in Montana can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
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 $500 in an FSA can roll over from year to year. 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.
Montana Top Income Tax Rate
|Year||Top Income Tax Rate|
Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2017 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics