Montana's New Property Tax Framework: Relief or Risk for Longtime Residents?
The Montana Legislature recently enacted significant changes to the state's property tax structure through Senate Bill No. 542 and House Bill No. 231. These reforms include a temporary tax structure effective in 2025, followed by a new, permanent framework beginning in tax year 2026. Together, they overhaul the taxation of class four residential and commercial properties, introducing progressive structures marketed as tax relief for Montana residents. But behind the promise of relief lies a reality that may burden, rather than benefit, many longtime Montanans.
A Three-Phase Reform: 2024, 2025, 2026, and Beyond 2024: SB 542's Standalone Marginal Rate
For tax year 2024, SB 542 imposes a temporary progressive marginal rate on all class four residential properties, regardless of occupancy or use. The rate increases with value and ranges from 0.76% on the first $50,000 to 2.2% on value above $2 million:0.76% on the first $50,000
- 0.95% on the portion between $50,001 and $500,000
- 1.15% on the portion between $500,001 and $750,000
- 1.20% on the portion between $750,001 and $1 million
- 1.40% on the portion between $1,000,001 and $1.5 million
- 1.89% on the portion between $1,500,001 and $2 million
- 2.20% on value exceeding $2 million
This structure expires at the end of 2024. In 2025 and 2026, HB 231 replaces it with a two-tiered flat rate system based on whether a property qualifies as a principal residence or long-term rental.
2025—2026: HB 231's Transitional Relief
Beginning in 2025, HB 231 temporarily replaces the 2024 system with a flat rate structure that depends on whether a property qualifies for reduced tax treatment.
- Qualifying principal residences and long-term rentals are taxed at 1.1% of market value, up to a cap. If a home's market value exceeds four times the statewide median residential value, the excess is taxed at the standard residential rate of 1.9%.
- Non-qualifying properties, including second homes, short-term rentals, and homes that don't meet the ownership and occupancy rules, are taxed at the full 1.9% rate on the entire value.
HB 231 offers automatic qualification for the reduced rate in 2025 and 2026 to homeowners who received the 2023 property tax rebate or participated in certain property tax assistance programs. Others may apply manually by March 1 of each tax year. But this relief expires after 2026, and owners must then qualify under a new regime.
Starting in 2026: SB 542's Permanent Tiered System
SB 542's long-term structure begins in tax year 2026 and only applies to homeowners and landlords who meet new eligibility criteria and apply under Sections 6 and 7 of that bill. Qualifying properties will be taxed on a tiered rate schedule, based on how far their value exceeds the statewide median residential value:
- 0.76% on value up to the median
- 0.90% on value between 1x and 2x the median
- 1.10% on value between 2x and 4x the median
- 1.90% on value exceeding 4x the median
All other residential property, including those who fail to apply or do not qualify, will be taxed at a flat 1.9%, regardless of value.
Qualified commercial properties benefit from a tiered structure: 1.5% on value up to 6Ã the statewide median commercial value, and 2.1% on the remainder. Non-qualifying commercial properties are taxed at 2.1% flat.
While SB 542 frames its 2026 tiered rate system as a homestead-friendly policy, the reality is that once eligibility is established, the tax rate is tied entirely to market value, not to the homeowner's income, tenure, or community roots. In high-growth areas, longtime Montanans will find themselves paying the same top-tier 1.9% rate as luxury home investors, simply because their property values crossed an arbitrary threshold. In this way, SB 542 recreates the very inequities it claims to solve.
Who Qualifies for Reduced Rates?
The state's new definition of who qualifies for relief is strict. To access the reduced homestead rate, a property must serve as the owner's principal residence for at least seven months of the tax year, be the sole property for which the rate is claimed, and be current on all tax obligations. Landlords may qualify for the same rate, but only if the home is rented for at least seven months to a long-term tenant, and they may have to reapply on a regular basis. All qualifying landlords must reapply annually to maintain the reduced rate. Beginning in 2028, the Department will randomly select 20% of long-term rental applicants each year for additional verification of compliance.
A Blunt Tool That Misses the Mark
Under SB 542's permanent framework beginning in 2026, Montana draws a sharp line at four times the statewide median residential value. Once a qualifying property's assessed value exceeds this threshold, it is taxed at the highest marginal rate of 1.9%. This top-tier rate applies uniformly, without regard to the homeowner's income, duration of ownership, or whether the home is a primary residence or a luxury investment property.
Even the temporary relief under HB 231, offering reduced rates of 1.1% for qualifying principal residences and long-term rentals, expires after 2026. Beginning in 2027, property owners must proactively apply under a new regime to maintain reduced-rate eligibility. If they fail to apply or do not qualify, the entire property is taxed at the full 1.9% rate, regardless of its use or the owner's circumstances. Even for qualifying properties, any portion of the home's value above four times the statewide median is taxed at the standard 1.9% rate. The result is a system that offloads risk and complexity onto homeowners, even those in long-established, modest households.
While the tax reform is framed as a homestead-friendly reform, its structural rigidity overlooks the economic and social realities of many Montanans. Tying tax burdens solely to fluctuating market values ignores the lived experience of those who have built lives and communities here, residents who now find themselves priced out of their own neighborhoods not by personal choice, but by rising assessments and inflexible policy.
As Montanans' property values rise, so do their tax burden. The new legislation, despite its stated goals, risks treating long-time Montana residents the same as non-resident luxury vacation homeowners. Without meaningful protections or exemptions, the law risks taxing certain residents out of the very communities they've shaped for generations.
If you have questions about how this legislation may affect you, contact Cody Crowley at Meyer Construction Law, LLC (crowley@meyerconstructionlaw.com). We are here to help you navigate Montana's legal and regulatory landscape.