If you own property in Montana, especially in high-demand areas like Bozeman or Big Sky, recent changes to the state’s property tax laws could significantly impact your bottom line. In 2025, Montana passed sweeping property tax legislation aimed at easing the tax burden on primary homeowners while shifting more of that responsibility to second homeowners and short-term rental operators.
As a licensed real estate agent in both Montana and Utah, and someone who specializes in helping buyers and investors navigate the Bozeman and Big Sky markets, I’m breaking down what these changes mean for you.
What Is the New Montana Property Tax Law?
The legislation introduces a two-tiered property tax system that differentiates between primary residences and all other properties. It’s designed to provide relief for full-time residents while increasing the tax burden on secondary homes and short-term rental properties. These changes will be fully implemented by 2026.
Key Property Tax Changes to Know
1. Homestead Exemption for Primary Residences
-
If you live in your home for at least 7 months of the year, you can apply for a homestead exemption.
-
This could reduce your property taxes by an average of 18% by 2026.
-
You must apply for the exemption by March 1, 2026.
-
This exemption also applies to long-term rental properties leased on a monthly basis for 7 months or more.
2. Higher Taxes for Second Homes and STRs
-
Properties that do not qualify for the homestead exemption (i.e., vacation homes and short-term rentals) will see higher property taxes.
-
By 2026, these owners can expect an average tax increase of about 68%.
3. New Tax Rates Starting in 2026
For properties that qualify for the homestead exemption:
-
0.76% on the first $400,000 of value
-
1.1% on the next $1.1 million
-
2.2% on the value above $1.5 million
For properties that do not qualify:
-
Flat rate of 1.9% on the full assessed value
4. 2025 Rebate for Primary Residents
-
A one-time $400 rebate is available in 2025 for qualified primary residents.
-
You must apply between August 15 and October 1, 2025.
Who Is Most Affected?
-
Primary Residents: Will benefit the most, especially if they apply for the homestead exemption on time.
-
Second Homeowners: Will experience a noticeable increase in property taxes.
-
Short-Term Rental Owners: May see higher operating costs, which could affect profitability. If you rent your home monthly for at least 7 months, consider switching to qualify for the exemption.
What You Should Do Now
-
Apply for the Homestead Exemption if you qualify.
-
Plan ahead for increased expenses if you own a second home or short-term rental.
-
Consult a tax professional to understand how these changes impact your financial strategy.
Local Expertise You Can Trust
Navigating Montana real estate and tax law can feel overwhelming, especially with new changes. Whether you're a full-time resident, vacation homeowner, or investor, I’m here to help you understand your options and make the most of your property.
Want to learn more about short-term rental opportunities or long-term investment strategies in Bozeman or Big Sky? Contact me here or explore our Montana Real Estate Blog for more insights.
