Montana’s veteran benefit package in 2026 centers on a targeted income tax exemption for working military retirees — one of the more nuanced retirement tax programs in the country — and a property tax reduction program for 100% disabled veterans that scales with income rather than providing a blanket exemption. The state has approximately 83,000 veterans and a strong National Guard presence, with Malmstrom Air Force Base near Great Falls serving as the state’s primary active duty installation and home to Air Force Global Strike Command’s 341st Missile Wing.
USMilitary.org is an independent educational resource, not affiliated with the Montana Department of Military Affairs, the VA, or any government agency. For official benefit information, visit veterans.mt.gov.
- Working military retirees who moved to Montana after June 30, 2023, or were Montana residents before receiving retirement pay, may deduct up to 50% of military retirement income from state taxes for up to five consecutive years (expires 2033)
- Veterans aged 65+ receive an additional $5,500 subtraction from federal taxable income starting in the 2024 tax year
- The Montana Disabled Veterans (MDV) Assistance Program reduces property taxes for 100% service-connected disabled veterans — with reductions of 50% to 100% based on income
- For tax year 2026, the MDV full reduction applies to single filers with income up to $48,152 and married filers up to $57,781
- Montana National Guard members and honorably discharged veterans may receive tuition waivers at Montana University System schools after exhausting all other benefits
- Active duty pay is fully exempt from Montana income tax
- Income Tax Benefits
- Property Tax: Montana Disabled Veterans Program
- Education Benefits
- Employment Benefits
- Veterans Home
- Hunting, Fishing, and Recreation
- Vehicle Benefits
- Surviving Spouse Benefits
- How to Access Montana Veteran Benefits
- Frequently Asked Questions
Income Tax Benefits
Working Military Retirement Exemption — Up to 50% for Five Years
Montana’s most significant income tax benefit for veterans is the Working Military Retirement Exemption, enacted by the 2023 Legislature and effective starting with tax year 2024. The exemption is specifically designed to attract working military retirees to Montana and reward those who are already residents.
How it works: Eligible working military retirees may deduct the lesser of (a) 50% of their military retirement income, or (b) the amount of their Montana source wage income. The exemption applies for up to five consecutive years after the taxpayer first meets the eligibility requirements, and is scheduled to expire after tax year 2033.
Who qualifies:
- Became a Montana resident on or after July 1, 2023 — eligible upon establishing residency
- Was a Montana resident before beginning to receive military retired pay — eligible retroactively for pay received as a Montana resident
- Must be actively earning Montana source wage income (working in Montana) to claim the exemption in any given year
Practical example: A military retiree earning $40,000 in pension income and $50,000 in wages from a Montana employer can deduct the lesser of $20,000 (50% of $40,000) or $50,000 (wages). The deduction is $20,000 — saving approximately $1,800 at Montana’s top marginal rate of 6.75% in the first five qualifying years.
Important limitation: The exemption requires the retiree to be working and earning wages in Montana. Retirees who are not employed cannot claim this exemption in a given year, even if they qualified in prior years.
Age 65+ Additional Subtraction — $5,500
Starting with the 2024 tax year, Montana taxpayers age 65 and older receive an additional $5,500 subtraction from their federal taxable income. This benefits older military retirees whose pension exceeds the working retirement exemption threshold or who are no longer working.
Active Duty Pay — Fully Exempt
Active duty military pay is fully exempt from Montana income tax. Montana residents on active duty do not owe state income tax on their military pay for periods of active service.
Military Disability Retirement Pay — Exempt
Military disability retirement pay received as a pension, annuity, or similar allowance for personal injury or sickness from active service is not included in Montana taxable income.
VA Disability Compensation — Exempt
VA disability compensation and DIC are federally tax-free and carry no Montana state tax liability.
Property Tax: Montana Disabled Veterans Program
The Montana Disabled Veterans (MDV) Assistance Program reduces the property tax rate on the primary home of qualifying 100% service-connected disabled veterans. The reduction is income-based and scales from 50% to 100% of the property tax bill depending on the veteran’s adjusted gross income.
Eligibility for Tax Year 2026:
- 100% service-connected disability rating from the VA (permanent or temporary)
- Own or be under contract to purchase a primary residence in Montana
- Occupy the home as primary residence for at least seven months of the year
- 2024 Federal Adjusted Gross Income (excluding capital and income losses) below the applicable income limit
2026 MDV Reduction Schedule — Single Filers:
| Income Range | Property Tax Reduction |
|---|---|
| $0 – $48,152 | 100% |
| $48,153 – $52,968 | 80% |
| $52,969 – $57,781 | 70% |
| $57,782 – $62,598 | 50% |
| Above $62,598 | Not eligible |
2026 MDV Reduction Schedule — Married Filers / Head of Household:
| Income Range | Property Tax Reduction |
|---|---|
| $0 – $57,781 | 100% |
| $57,782 – $62,598 | 80% |
| $62,599 – $67,412 | 70% |
| $67,413 – $72,229 | 50% |
| Above $72,229 | Not eligible |
In 2025, approximately 3,612 disabled veterans and surviving spouses received an average tax benefit of $1,913 through the MDV program. The income ranges are adjusted annually for inflation.
Application deadline: April 15 annually. File with the Montana Department of Revenue. For homes on agricultural or forest land, the benefit applies to the home and one-acre homesite only.
Important note on VA disability income: VA disability compensation is excluded when calculating the FAGI threshold for MDV eligibility. A veteran whose primary income is VA disability compensation may qualify at income levels that appear to exceed the limit once non-disability income is excluded from the calculation — confirm with the Montana Department of Revenue.
Education Benefits
Montana National Guard and Veterans Tuition Waiver
Members of the Montana National Guard and honorably discharged veterans may receive tuition waivers at Montana University System institutions after all other state and federal education benefits (Post-9/11 GI Bill, Pell Grant, etc.) have been exhausted. This waiver covers remaining tuition costs not covered by other benefits — it functions as a last-resort supplement rather than a primary benefit.
Contact the Montana University System or individual institution financial aid offices for current availability and application requirements. Guard members should also contact their unit’s education officer for the Guard-specific tuition assistance programs.
Want updates when benefit rates change?
Join thousands of service members who get our free weekly briefing.
Employment Benefits
Veterans Hiring Preference
Montana provides veterans’ preference in hiring for public employment (state agencies) and, in some circumstances, private employment under state law. Veterans receive preference points added to competitive examination scores. Disabled veterans receive additional preference. The Montana Department of Labor and Industry administers the employment preference program.
Veterans Home
Montana operates the Montana Veterans’ Home in Columbia Falls, providing long-term nursing and residential care for eligible Montana veterans. The facility offers multiple levels of care. Contact the Montana Department of Military Affairs, Veterans’ Affairs Division for current admission criteria and availability.
Montana maintains the Montana Veterans Memorial Cemetery near Laurel, providing burial services for eligible Montana veterans and their dependents.
Hunting, Fishing, and Recreation
Montana provides hunting and fishing license benefits for qualifying veterans. Disabled veterans with service-connected disabilities may qualify for reduced-cost or free licenses depending on their rating. Active duty members stationed in Montana may be eligible for resident license rates. Contact Montana Fish, Wildlife and Parks for current license schedules and veteran eligibility details.
Vehicle Benefits
Disabled veterans with qualifying service-connected disabilities may be eligible for a waiver of vehicle registration fees in Montana. Veteran-designated license plates are also available. Contact the Montana Motor Vehicle Division for current plate options, fee waivers, and required documentation.
Surviving Spouse Benefits
Unmarried surviving spouses of 100% service-connected disabled veterans are eligible for the MDV property tax reduction program under a separate income schedule (reduced income thresholds vs. married filers). Surviving spouses must provide VA documentation verifying the deceased veteran’s 100% disability status at the time of death. The MDV benefit for surviving spouses applies as long as they remain unmarried and continue to own and occupy the qualifying home.
How to Access Montana Veteran Benefits
- Montana Veterans’ Affairs Division: veterans.mt.gov
- MDV property tax reduction: File Form MDV by April 15 with the Montana Department of Revenue at revenue.mt.gov
- Working military retirement exemption: Claim on Montana Form 2; contact Montana Department of Revenue for guidance
- Tuition waiver: Contact individual Montana University System institutions or the Montana National Guard Education Office
- Veterans home: Contact Montana Department of Military Affairs, Veterans’ Affairs Division
This article is provided by USMilitary.org, an independent educational resource. We are not affiliated with the Montana Department of Military Affairs, the VA, or any government agency. Income thresholds are adjusted annually — verify current figures at revenue.mt.gov.
Frequently Asked Questions
Montana taxes military retirement pay as regular income in most circumstances. However, working military retirees who are Montana residents can deduct up to 50% of their retirement income (capped at their Montana wage income) for up to five consecutive years under the Working Military Retirement Exemption enacted in 2023. Veterans age 65+ receive an additional $5,500 income subtraction.
The MDV program reduces property taxes on the primary home of 100% service-connected disabled veterans by 50% to 100%, depending on income. Single filers with 2024 FAGI under $48,152 receive a 100% reduction. The program is income-based and must be applied for annually by April 15.
Yes. The Working Military Retirement Exemption requires the retiree to be earning Montana source wages in the same tax year they claim the exemption. The deduction equals the lesser of 50% of retirement income or the amount of Montana wages — so a retiree who isn’t working gets no deduction under this program, regardless of prior qualifying years.
Yes. Unmarried surviving spouses of qualifying 100% disabled veterans are eligible for the MDV reduction under a separate income schedule. The benefit continues as long as the surviving spouse remains unmarried and continues to own and occupy the home as their primary residence.