Montana taxpayers with a decent-sized income will see a smaller state tax bill starting in tax year 2027. The state’s top income tax rate drops from 5.65 percent in 2026 to 5.4 percent in 2027, and the income that is taxed at the lower 4.7 percent rate grows by $35,000 for couples filing together. The Montana Department of Revenue lays out the changes from House Bill 337.

The 2026 and 2027 brackets side by side

Montana taxes income at two rates. The first slice of taxable income is taxed at 4.7 percent, and everything above it at the higher rate. House Bill 337 changes both the rate on top and the size of the first slice, in two steps.

For 2026, the 4.7 percent rate covers the first $47,500 for a single filer, the first $71,250 for a head of household and the first $95,000 for a married couple filing jointly. Income above those lines is taxed at 5.65 percent.

For 2027, the lower rate stretches to $65,000 for a single filer, $97,500 for a head of household and $130,000 for joint filers. Income above those lines is taxed at 5.4 percent. The state’s legislative fiscal staff describe the bracket amounts as based on Montana taxable income, which is the figure left after deductions, not gross pay.

What the change is worth in dollars

The state has not published a single savings number, because the result depends on income and filing status. The arithmetic can be done from the brackets, though. A joint-filing couple with $150,000 of Montana taxable income owes $7,572.50 under the 2026 brackets and $7,190 under the 2027 brackets, a drop of $382.50. A single filer with $100,000 pays $5,198.75 in 2026 and $4,945 in 2027, a drop of $253.75.

These two figures are this article’s own math from the published brackets and are not state estimates. Someone whose taxable income stays under the 2026 lower line, $47,500 for a single filer or $95,000 for a joint return, would owe the same 4.7 percent either year. A lower-income filer sees no rate savings from this part of the law.

The savings grow with income above the old line, because the wider first bracket and the lower top rate both apply there.

The question for most households is which side of the line their income falls on. Anyone with taxable income under the 2026 lower line sees little from the rate change but may gain from the credit, while higher earners get their gain from the wider bracket and lower top rate.

The first Montana returns to use the doubled earned income credit are the 2026 returns filed next year, and the lower 5.4% top rate follows with tax year 2027.

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The bigger earned income credit

The law also changes the state’s earned income tax credit, the refundable credit for working households with modest pay. The Department of Revenue says it rises to 20 percent of the federal earned income tax credit, beginning with tax year 2026. The Daily Montanan reported in April 2025 that the credit had been 10 percent of the federal amount before the bill. Legislative staff say the doubling costs the state about $30 million a year.

That change reaches lower earners rather than higher ones. A worker who gets a federal credit of $1,000 would get a Montana credit of $200 under the new rule, compared with $100 before. The federal amount is set by the IRS, and it varies with income and the number of children.

How lawmakers got here

House Speaker Brandon Ler, a Savage Republican, sponsored House Bill 337. The Daily Montanan reported on April 22, 2025 that it was a compromise between the governor’s plan to cut the top rate and a middle-class tax cut backed by conservative Republicans and some Democrats. Gov. Greg Gianforte had proposed cutting the top rate by a full percentage point and raising the earned income credit to 15 percent.

All Senate Republicans voted for the bill, and all but two Democrats voted against it, the paper reported. The fiscal note estimated the bill would lower general fund collections by $20 million in fiscal 2026 and $190 million in fiscal 2027.

What the state expects it to cost

Montana’s legislative fiscal division says the bill will be fully in place on Jan. 1, 2027. Its June 2026 outlook puts the revenue loss at about $265 million in the first full fiscal year and says the effects will not be fully felt until fiscal year 2028, because of the delayed start. The division gives a cumulative figure of $513 million.

Property taxes are not part of this bill, the Daily Montanan noted. Property tax relief was left for a separate effort, so the income tax change does not touch a homeowner’s tax bill.

When the new rates show up

Nothing changes on a 2026 return except the earned income credit. The 2026 rates and bracket amounts stay as listed, and the filing happens in early 2027. The lower top rate and wider first bracket apply to income earned in calendar year 2027, and those returns are filed in 2028.

Self-employed Montanans who make quarterly estimated payments can use the 2027 lines when they work out those payments for next year.

Planning a 2027 Montana tax bill

The free source is the Montana Department of Revenue at revenue.mt.gov, whose page on the bill carries the full bracket tables. Anyone who wants to know where they stand can compare last year’s Montana taxable income to the 2027 lines for their filing status.

It helps to keep the numbers handy. The Montana line on last year’s return shows taxable income, and the federal earned income credit amount, if there was one, shows what the state credit would be at 20 percent. A filer near a bracket line should watch how raises, retirement withdrawals or a pension would move taxable income across it.

The department’s page and the legislature’s fiscal reports are where any later change to the rates would appear first.

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This article was produced with AI assistance and edited for accuracy against the sources linked above.