StructuredSales.org
StructuredSales.org
Montana taxes long-term capital gain below wages. After House Bill 337, 2026 rates on net long-term capital gain are 3.0% and 4.1%. Ordinary income is 4.7% and 5.65%. On a ranch sale the lower rate covers only gain under a bracket most operating families have already filled. The number that changes a Fergus County or Powder River return is still federal: 15% or 20%, plus 3.8% NIIT, in the year the gain is recognized.
A structured installment sale under IRC §453 recognizes gain as payments arrive. In Montana that can reuse the 3% band if other income leaves any room, and it taxes each payment under that year's brackets, which widen in 2027. The large effect is federal: keeping a big gain out of the top bracket and, often, under the NIIT threshold.
MCA 15-30-2103, as the Department of Revenue explains it on the HB 337 page, works like this for 2026. Ordinary Montana taxable income — the Department's footnote says this figure does not include long-term capital gains — is taxed at 4.7% up to $95,000 on a joint return and at 5.65% above $95,000. Head of household uses $71,250. Single filers and married people filing separately use $47,500.
Net long-term capital gain, defined by reference to Internal Revenue Code section 1222, has its own schedule. On a joint return, 3% applies to the first $95,000 of that gain minus nonqualified taxable income. The rest is 4.1%. If nonqualified taxable income is already $95,000 or more, every dollar of net long-term gain is 4.1%. There is no acreage exclusion.
If pensions, wages, and cow-calf income already produce $95,000 of Montana taxable income, the entire long-term gain is taxed at 4.1%, lump sum or installment. Spreading cannot open a 3% band other income has closed. A couple with $40,000 of other taxable income has $55,000 of room at 3%, used once per year. Gain above that room is 4.1%.
For 2027 the Department says the long-term rates stay 3.0% and 4.1%, and the brackets move with ordinary income: $130,000 joint, $97,500 head of household, $65,000 single. The ordinary top rate drops to 5.4%. A 2027 payment is not taxed on the 2026 card. Run 2026 and 2027 as different years. This article does not invent post-2027 bracket dollars.
Montana follows the federal method of accounting. Administrative Rule 42.2.307 says the Montana method is the federal method, and a federal change carries over. Installment gain on Form 6252 is Montana income in the same year, in the same character. Character is the whole game under HB 337.
Section 1245 recapture is ordinary, and section 453(i) recognizes it in the year of sale even when the land is installment-reported. Montana taxes it at 4.7% and 5.65%, not at 3% and 4.1%. Interest is ordinary. Calves, grain, and hay are inventory. Breeding stock that federal law treats as long-term or section 1231 gain can qualify for the lower rates. That is a holding-period question. The farmland guide separates land from recapture. Use the same split on a ranch.
Inherited deeded ground takes a basis under section 1014. A recent Gallatin or Flathead inheritance may already reflect today's price. A 1990s inheritance does not. Selling inherited farmland and holding for another step-up belong in the same meeting as the installment illustration. Montana's lower rates do not make a seven-figure federal bill small.
The classic Montana seller is a cow-calf outfit in Fergus, Petroleum, Garfield, or Custer County. The deeded acres are the asset. Basis is often a 1970s purchase or an old step-up. Installment gain is the long-term gain on that real estate, after recapture and inventory. A sale to children triggers section 453(e) and, for depreciable property, section 453(g), which can accelerate gain or block installment treatment. Those rules are in the section 453 explainer, and they show up when one sibling stays and the others want cash.
Gallatin, Missoula, and Flathead sales are often land priced like a subdivision, or a rental near Bozeman. Compare a 1031 in farmland: 1031 or installment and installment sale versus 1031. An installment sale pays you without the buyer's credit risk, which is the difference in installment sale versus carrying a note. Do not assume 3% applies to ordinary timber or an easement until the federal character is settled.
Colorado is the nearest farm-state guide here, and the tools differ. Colorado may subtract up to $100,000 of gain on agricultural land acquired before June 4, 2009 by a Schedule F filer, and otherwise taxes the rest at 4.4%. Montana taxes long-term gain at 3% or 4.1% with no dollar cap and no acquisition-date window. A ranch on the line needs both returns. Idaho shares the border and has its own page.
Nonresidents owe Montana tax on Montana-source income. Gain from real property in Montana is that kind of income. Because the accounting method follows the federal return, each installment payment's gain is reported when Form 6252 reports it, and the nonresident return picks up the Montana-source portion. Collecting a payment from an Arizona mailbox does not change the source. The deeded acres do.
Married filing jointly. Other income is $70,000, and the Montana column assumes $70,000 of nonqualified taxable income. Those bases can differ. Installment-eligible long-term gain is $1,200,000 of deeded land. Recapture, raised livestock, and interest are excluded. Eight slices of $150,000. Every Montana year uses 2026 figures: $25,000 of room at 3% ($95,000 minus $70,000) and the rest at 4.1%. Federal tax uses Revenue Procedure 2025-32, the $32,200 standard deduction, and 3.8% NIIT above $250,000 of modified adjusted gross income. Estimates only.
| Estimate | Recognize in one year | Eight annual slices |
|---|---|---|
| Federal long-term gain tax | $202,040 | $106,680 |
| Federal 3.8% NIIT | $38,760 | $0 |
| Montana tax on the long-term gain | $48,925 | $47,000 |
| Combined | $289,725 | $153,680 |
Montana's piece of the savings is about $1,925. The lump sum uses the $25,000 band at 3% once ($750) and taxes $1,175,000 at 4.1% ($48,175). Each installment year uses the band again ($750) and taxes $125,000 at 4.1% ($5,125), eight times, for $47,000. If other Montana taxable income were already $95,000, both Montana columns would be 4.1% of $1.2 million, or $49,200, and the state savings would be zero.
The federal difference is about $134,000. The lump sum puts roughly $624,000 in the 20% bracket and roughly $1.02 million of modified adjusted gross income over the NIIT line. Each $150,000 slice leaves about $61,100 in the 0% band and the rest at 15%. Modified adjusted gross income of $220,000 stays under $250,000 here, so the slices show no NIIT. Dividends and rents can change that. Section 453A applies when year-end installment obligations exceed $5 million.
If 2027's joint threshold of $130,000 applied, the 3% room at $70,000 of other income would be $60,000 rather than $25,000. Later slices would cost less Montana tax than the table shows. The table uses the more expensive state column on purpose.
House Bill 337, at MCA 15-30-2103, taxes net long-term capital gains at 3.0% and 4.1%. On a joint return the 3% slice is the first $95,000 minus other Montana taxable income. The rest, and all of the gain if other income is already at least $95,000, is 4.1%. Ordinary income is 4.7% up to $95,000 and 5.65% above. Single and separate filers use $47,500. Head of household uses $71,250.
Only if other income is under the threshold. The 3% room is the bracket minus nonqualified taxable income, recomputed each year. At $70,000 of other income the 2026 joint room is $25,000. A lump sum uses it once. Eight years use it eight times. Everything above the room is 4.1%. If other income already fills the threshold, installment reporting does not cut the Montana rate.
The Department of Revenue says long-term rates stay 3.0% and 4.1%, and the brackets widen with ordinary income: $130,000 joint, $97,500 head of household, $65,000 single. Ordinary tax above those amounts falls from 5.65% to 5.4%. A 2027 payment uses 2027 brackets. Do not freeze 2026 dollars for a ten-year schedule.
No. The 3% and 4.1% rates apply to net long-term capital gain under section 1222. Section 1245 recapture is ordinary income in the year of sale under section 453(i). Interest is ordinary. Calves, grain, and hay are not long-term gain. Breeding livestock that federal law treats as long-term or section 1231 gain can qualify. That is a facts question.
Montana taxes nonresidents on Montana-source income, and gain from Montana real property is Montana-source. Administrative Rule 42.2.307 requires the federal accounting method, so installment gain is reported when federal law says it is reported. The source of that gain follows the land. A move to Arizona changes where you file as a resident. It does not move the ranch. Confirm the nonresident form for each payment year with a Montana preparer.
Last reviewed: October 22, 2026. The table applies 2026 Montana brackets to every year and is an estimate, not a return.
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