Military retirement pay in Montana
Varies
Does Montana Tax Military Retirement Pay?
Short answer: Partly. Eligible retirees can exempt the lesser of 50% of their military retirement pay or their Montana wage, business, or farm income, for 5 consecutive years. To qualify, a retiree must have become a resident after June 30, 2023, or been a resident before starting to receive retired pay. Survivor Benefit Plan recipients can exempt 50% of survivor benefits whether or not they have other income. SB 124 (2025) repealed the 2033 sunset. Retirees who don't meet the residency rules, or who are past their 5 years, are fully taxed. Other retirement income: Pensions and 401(k)/IRA withdrawals are taxable; the former partial pension exemption was repealed. Taxpayers 65+ get a general senior subtraction ($5,660 per person in 2025, inflation-indexed) that can offset retirement income.
Military retired pay is taxable federally; VA disability compensation isn't taxed federally or by any state.
Records to keep: Keep your state return, W-2s and 1099s (1099-R, SSA-1099), and any state credit worksheets. Check your state revenue department's current-year instructions before you file.
Military retirement pay in Montana
Varies
Individuals / Personal Taxes
Partly. Eligible retirees can exempt the lesser of 50% of their military retirement pay or their Montana wage, business, or farm income, for 5 consecutive years. To qualify, a retiree must have become a resident after June 30, 2023, or been a resident before starting to receive retired pay. Survivor Benefit Plan recipients can exempt 50% of survivor benefits whether or not they have other income. SB 124 (2025) repealed the 2033 sunset. Retirees who don't meet the residency rules, or who are past their 5 years, are fully taxed. Other retirement income: Pensions and 401(k)/IRA withdrawals are taxable; the former partial pension exemption was repealed. Taxpayers 65+ get a general senior subtraction ($5,660 per person in 2025, inflation-indexed) that can offset retirement income.
Business justification
Partly. Eligible retirees can exempt the lesser of 50% of their military retirement pay or their Montana wage, business, or farm income, for 5 consecutive years. To qualify, a retiree must have become a resident after June 30, 2023, or been a resident before starting to receive retired pay. Survivor Benefit Plan recipients can exempt 50% of survivor benefits whether or not they have other income. SB 124 (2025) repealed the 2033 sunset. Retirees who don't meet the residency rules, or who are past their 5 years, are fully taxed. Other retirement income: Pensions and 401(k)/IRA withdrawals are taxable; the former partial pension exemption was repealed. Taxpayers 65+ get a general senior subtraction ($5,660 per person in 2025, inflation-indexed) that can offset retirement income. Military retired pay is taxable federally; VA disability compensation isn't taxed federally or by any state.
Category
- Personal Tax Deductions