Montana's New Second-Home Tax: Shifting the Property Tax Burden
Photo: @rocinante_11
Overview
In April 2025, Governor Greg Gianforte signed two major property tax reform bills (House Bill 231 and Senate Bill 542) into law, marking a dramatic shift in how Montana taxes real estate. This legislation is poised to significantly lower property taxes for homeowners and long-term landlords, while simultaneously raising taxes for second-home owners and short-term rental properties.
These reforms are set to roll out over two years, with interim rates applied in 2025 and full implementation occurring in 2026. The intent: shift tax burdens away from long-term Montana residents and toward seasonal and investment property owners.
Purpose of the New Tax Structure
The reforms aim to:
Relieve Montana homeowners from rising tax burdens amid soaring property values.
Penalize speculative investment in short-term rentals and vacation properties.
Reinvest tax revenues into community infrastructure and affordable housing initiatives.
Homestead Exemption & Eligibility
Homestead Properties include:
Owner-occupied residences lived in for at least 7 months per year.
Long-term rentals leased out for 7+ months annually.
These qualify for significant tax breaks and a tiered tax rate structure based on home value.
Summary of Key Tax Shifts (2024–2026)
Property Type + Average Tax Bill Change
Owner-Occupied Homes (Homestead) ⬇ 18%
Long-Term Rentals ⬇ 22%
Non-Homestead Residential (e.g., second homes, STRs) ⬆ 68%
Commercial Property ⬆ 3%
Homes on Agricultural Land ⬆ 25%
Agricultural Land ⬆ 2%
Industrial/Other ⬆ 10%
Note: Actual property tax bills will vary based on location, property classification, local mill levies, and assessed market value.
Tiered vs. Flat Rates
Tiered Structure for Homesteads
Designed to shield lower-value properties.
Example: Homes over $1.5M taxed at nearly 3x the rate of homes under $400K.
Flat Rate for Non-Homestead Properties
Beginning 2026, second homes and STRs will be taxed at a flat 1.9%.
County-Specific Impacts (2024–2026)
Flathead
Owner-Occupied ⬇ 17%
Long-Term Rentals ⬇ 27%
Non-Homestead ⬆ 69%
Homes on Ag Land ⬆ 22%
Commercial ⬇ 4%
Ag Land ⬇ 7%
Ravalli
Owner-Occupied ⬇ 18%
Long-Term Rentals ⬇ 23%
Non-Homestead ⬆ 81%
Homes on Ag Land ⬆ 29%
Commercial ⬇ 3%
Ag Land ⬆ 3%
Lake
Owner-Occupied ⬇ 25%
Long-Term Rentals ⬇ 32%
Non-Homestead ⬆ 58%
Homes on Ag Land ⬆ 15%
Commercial ⬇ 9%
Ag Land ⬇ 7%
Missoula
Owner-Occupied ⬇ 9%
Long-Term Rentals ⬇ 13%
Non-Homestead ⬆ 105%
Homes on Ag Land ⬆ 45%
Commercial ⬆ 8%
Ag Land ⬆ 16%
Key Projections
If no legislation had passed, homeowner taxes would have risen 11% over two years.
Under the new law, those same taxpayers see an 18% average decrease.
In contrast, second homes and STRs rise 68% — from a projected 14% under old law.
Implementation Timeline
2025: Interim rates apply; some homeowners will experience increases before full homestead relief kicks in.
2026: Full rollout, including:
Flat 1.9% tax on second homes/STRs.
Tiered homestead exemption.
Statewide Property Base Overview
Category & % of Tax Base
Owner-Occupied Homes — 25.3%
Long-Term Rental — 15.2%
Non-Homestead Residential — 15.8%
Commercia — 13.3%
Ag Homes (No Homestead) — 3.0%
Agricultural Land — 3.3%
Industrial/Other — 24.1%
Based on taxable value — a small fraction of market value
Potential Legal and Classification Questions
Mixed-Use Property: How are short-term rentals taxed if located on the same parcel as a primary residence?
LLC-Owned Long-Term Rentals: Will they qualify for the homestead exemption?
Multi-Parcel Ranches: Will the tax increase apply to all parcels or just the residential improvements?
Additional Notes
2025 is a reappraisal year: Average statewide increase in assessed values expected at 20%.
Next Legislative Review: Not expected until 2027, and significant rollback of this tax structure is unlikely.
Conclusion
Montana's new property tax code represents one of the state’s most significant shifts in tax policy in decades. By realigning tax responsibilities based on usage — prioritizing full-time residents over seasonal investors — the reform aims to balance housing market pressures and fund essential community needs. However, wide-ranging effects and property-specific complexities mean that staying informed and consulting professionals will be essential for property owners navigating the transition.
Sources:
Montana Free Press, Eric Dietrich, May 2025
Parsons Behle & Latimer: Ross Keogh, Emma Duganske
Montana Department of Revenue Projections and County Data
Legislative Record, House Bill 231 and Senate Bill 542