How Montana capital gains tax on rental property works
A rental sale in Montana is taxed federally like anywhere else: depreciation recapture at your ordinary rates up to 25%, the rest of a long-term gain at 0%, 15% or 20%, and the 3.8% net investment income tax at higher incomes. On top of that, Montana taxes the gain. Long-term gains are taxed at 3.0%, or 4.1% above $47,500 of taxable income ($95,000 joint).
- Montana taxes net long-term capital gains at 3.0% and 4.1% instead of its 4.7% and 5.65% ordinary rates. Ordinary income fills the 3.0% range first. Short-term gains are taxed as ordinary income.
In the calculator above, the Montana tax is the difference between the state tax on your income with the sale and without it, so deductions, brackets and any exclusion are applied as Montana applies them.
Worked example: selling a Montana rental
A single investor earning $90,000 bought a Montana rental in June 2016 for $300,000, paid $6,000 in closing costs and later spent $20,000 on improvements. They sell in November 2026 for $500,000 with 6% selling costs. Estimated depreciation of $92,727.27 leaves a gain of $236,727.27.
| Amount | |
|---|---|
| Federal income tax | $43,218.54 |
| Net investment income tax | $4,815.64 |
| Montana tax | $9,705.82 |
| Total tax | $57,740.00 |
| Cash kept after the $150,000 mortgage payoff | $262,260.00 |
Montana adds $9,705.82 to $48,034.18 of federal tax, for 24.4% of the gain in all. That ranks Montana 26 of 51 for state tax on this sale (1 is the lowest).
| Situation | Gain | Montana tax | Total tax |
|---|---|---|---|
| Single, $40,000 of other income | $236,727.27 | $9,446.22 | $51,930.40 |
| Single, $90,000 of other income (the example) | $236,727.27 | $9,705.82 | $57,740.00 |
| Married, $200,000 of other income | $236,727.27 | $9,705.82 | $59,784.00 |
| A flip sold after 9 months | $39,800.00 | $2,248.70 | $11,004.70 |
The first three rows sell the same property; the flip is a $360,000 sale of a house bought for $250,000 with $40,000 of work, held under a year, so its gain is short-term.
Montana vs. neighboring states
State tax on the same $500,000 sale in South Dakota, Wyoming, North Dakota and Idaho, lowest first. Each state links to its own calculator.
| State | How the gain is taxed | State tax | Total tax |
|---|---|---|---|
| South Dakota | No state income tax, so no South Dakota tax on the gain. | $0.00 | $48,034.18 |
| Wyoming | No state income tax, so no Wyoming tax on the gain. | $0.00 | $48,034.18 |
| North Dakota | 40% of a long-term gain is excluded; the rest is taxed at North Dakota's low rates. | $2,769.71 | $50,803.89 |
| Idaho | 60% of the gain on Idaho real property held at least 12 months is deducted; the rest is taxed at 5.3%. | $5,018.62 | $53,052.80 |
| Montana | Long-term gains are taxed at 3.0%, or 4.1% above $47,500 of taxable income ($95,000 joint). | $9,705.82 | $57,740.00 |
Where the property is matters as much as where you live: states tax gains on real estate located in them, so selling a rental in another state usually means filing there too.
All 50 states and D.C. are compared on the same sale in the state tax on selling a rental table, which you can sort and download.
Self-employed in Montana? The Montana 1099 tax calculator works out federal, self-employment and Montana income tax on freelance income, with the quarterly estimated payments.
States with similar rules
Montana is one of 12 states that exclude part of the gain or tax it at a special rate. These are the closest to it on the same $500,000 sale:
- South Carolina: $6,977.80 of state tax. 44% of a long-term gain is deducted; the rest is taxed at South Carolina's rates.
- Wisconsin: $9,078.02 of state tax. 30% of a long-term gain is excluded; the rest is taxed at Wisconsin's rates.
- Massachusetts: $11,836.36 of state tax. Long-term gains are taxed at 5% and short-term gains at 8.5%, plus a 4% surtax on income above $1,107,750.
- New Mexico: $12,458.41 of state tax. Up to $2,500 of the gain is deducted; the rest is taxed at New Mexico's rates.
Before you sell a rental in Montana
The sale of a rental goes on IRS Form 4797, which carries the gain to Schedule D and the depreciation part to the unrecaptured section 1250 gain worksheet. Before you file, gather the closing statements from both the purchase and the sale, your depreciation schedules (Form 4562 or your tax software's asset list) and receipts for improvements. Each of them changes your adjusted basis, and with it the gain.
A large gain can also bring an underpayment penalty if no tax is paid on it during the year. Federally, you avoid the penalty by paying, through withholding or estimated payments, at least 90% of this year's tax or 100% of last year's (110% if last year's AGI was over $150,000). Sending the tax on the sale with the next quarterly estimate is the simplest way to stay inside those rules. Montana's own estimated tax rules are set by the Montana Department of Revenue, so check them too.
If the rental produced losses you couldn't deduct under the passive activity rules, selling your entire interest to an unrelated buyer generally frees them in the year of the sale, which offsets part of the gain.
The bottom line
Rental property capital gains tax in Montana is federal tax plus Montana's: $9,705.82 of state tax and $57,740.00 in all on the example's $236,727.27 gain.
Enter your own numbers in the calculator to estimate your Montana capital gains tax on rental property, compare a sale with a 1031 exchange, and confirm the details with the Montana Department of Revenue or a tax professional before you sell.
Frequently asked questions
Does Montana tax capital gains on rental property?
Yes. Long-term gains are taxed at 3.0%, or 4.1% above $47,500 of taxable income ($95,000 joint). The gain is the sale price minus selling costs and your adjusted basis (what you paid, plus improvements, minus depreciation). On a $500,000 sale of a rental bought for $300,000 in 2016, a single seller earning $90,000 owes about $9,705.82 to Montana, 4.1% of the gain. The calculator above adds up the taxes on selling rental property in Montana for your own numbers.
How is depreciation recapture taxed in Montana?
Federally, the part of the gain that comes from depreciation, called unrecaptured section 1250 gain or depreciation recapture, is taxed at your ordinary rates up to 25%. Montana treats it as part of the net long-term capital gain, taxed at 3% or 4.1%.
Can a 1031 exchange defer Montana tax on a rental sale?
A 1031 exchange defers the federal tax if you reinvest in like-kind property within the 45- and 180-day deadlines, and most state income taxes defer the gain too. Rules differ when the replacement property is in another state, where some states keep track of the deferred gain, so confirm the treatment with the Montana Department of Revenue.
Does the 3.8% net investment income tax apply in Montana?
Yes. The net investment income tax is federal, so it applies the same way in every state: 3.8% of the gain or of your modified adjusted gross income above $200,000 ($250,000 joint), whichever is smaller. In the example it adds $4,815.64.
Do I owe Montana tax if I sell a rental there but live in another state?
Usually yes: states tax gains on real estate located within them, including for nonresidents, and some require tax to be withheld at closing. Your home state typically gives a credit for tax paid to Montana. This page assumes you live in Montana; rules for nonresidents can differ.
Sources and further reading
- MCA 15-30-2103, Rate of tax: net long-term capital gains (opens in a new tab), Montana Legislature
- 2026 State Income Tax Rates and Brackets (opens in a new tab), Tax Foundation
- Montana Department of Revenue (opens in a new tab), State of Montana
- Publication 544, Sales and Other Dispositions of Assets (opens in a new tab), Internal Revenue Service
- Instructions for Schedule D (Form 1040) (opens in a new tab), Internal Revenue Service
Related calculators
- Rental Property Depreciation CalculatorDon't know how much depreciation you've taken? Build the schedule from the IRS tables, improvements included.
- 1031 Exchange CalculatorBuying another rental with the proceeds? See how much of the gain a 1031 exchange defers.
- Hard Money Loan CalculatorFlipping your next property? Model the rehab loan, cash to close and the flip's profit before tax.