In an effort to lower property tax bills for homeowners and landlords who provide long-term rental housing, the state Legislature and Gov. Gianforte passed major tax relief legislation this year. As it’s implemented this year and next, the package will scale back taxes on most houses being used as primary residences while offsetting those cuts with higher taxes on most other residential properties starting in 2026.

As we cover the new tax policy, which the Montana Department of Revenue expects to boost second-home taxes by 68% on average, the MTFP newsroom is fielding many, many questions from readers. We’re compiling the most frequent ones — and the best answers we currently have — below.

We’ll update this story periodically as other questions roll into our inboxes and as officials release additional information on how the specifics of the new tax policy will work. As always, we’d love to hear comments and questions at news@montanafreepress.org.

Q: When will the second-home tax take effect?

Interim rates will lower taxes for many residential properties on the tax bills sent by county treasurers this fall. However, the second-home tax won’t be implemented until 2026 tax bills, when it will raise taxes on most residential properties that don’t qualify for a “homestead” exemption.

Proponents had initially wanted to make the second-home tax effective this year, but added provisions for an interim year after negotiations on it dragged into the final days of the legislative session, missing the February deadline Gianforte had initially said would be necessary for the revenue department to implement the full policy this year.

Q: Who is eligible for the lower residential homestead rates?

A: Two types of residential property owners: Homeowners who live in their homes at least seven months a year and landlords who rent homes out on long-term leases for at least seven months a year. Long-term means leases that last at least a month, like the leases used for resident rental housing but unlike the terms for Airbnb-style short-term rentals.

Q: Will there be more property tax rebates?

Yes. The Legislature also authorized a round of $400 rebates for homeowners, which will be available this year and apply against last year’s tax bill. Those follow the $675 rebates the Legislature authorized for homeowners in each of 2024 and 2023.

The new tax law requires the revenue department to mail a notice about the rebates to potentially eligible property owners by June 30. Eligible homeowners who meet the same seven-month occupancy standard that will be used for the eventual homestead exemption will be able to claim the rebate by applying between Aug. 15 and Oct. 1 this year.

Q: Do I need to apply to avoid paying the second-home tax?

Yes. When it takes full effect in 2026, the new law will assess higher taxes on any residential property that doesn’t qualify for the homestead exemption. Homeowners and landlords will need to apply to the revenue department for the exemption that will qualify them for lower rates.

Once homeowners are qualified for the homestead exemption, they will remain qualified until they sell the property, move elsewhere or apply for a homestead on a different residence. Landlords will need to periodically reapply to certify properties are still being used as long-term rentals.

Additionally, homeowners who qualify for a property tax rebate this year will be automatically qualified for the homestead exemption going forward.

Q: How do I apply?

As of May 2025, the revenue department hasn’t yet published the necessary forms, but homeowners and landlords will be able to apply either by mail or online. The new law specifies that the application deadline for 2026 tax bills will be March 1, 2026.

The applications will ask property owners to formally declare that they’re using a property as either a principal residence or long-term rental. If the department discovers a taxpayer has fraudulently claimed the benefit, the law specifies that they will have to pay a penalty of three times the amount saved and be subject to potential criminal prosecution under a state law that can n result in a $500 fine and a jail term of up to six months.

Eligible homeowners and landlords who fail to apply for the homestead rates initially may be able to receive refunds if they appeal successfully after receiving higher tax bills.

Q: I’ve heard there’s an exception for homes on agricultural land?

Yes. The tax package’s long-term rates place residential structures on agricultural land at their current levels regardless of whether they qualify as principal residences, an exemption intended to shield worker bunkhouses and other secondary residences in farm complexes from the second-home tax. That provision also means that second homes — including many high-value ones — located on qualified agricultural properties will be largely shielded from the second-home tax.

Separately from the second-home tax debate, revenue department officials and some lawmakers have expressed concern that it may be too easy to qualify undeserving properties for an agricultural status under current law, a process that currently requires reporting only $1,500 a year in agricultural income. A bill that would have tightened the qualification requirements for the agricultural designation, introduced separately from the property tax relief package, failed to pass the Legislature this year.  

Q: What if I run an Airbnb out of part of my home? Will that keep me from qualifying for the homestead exemption?

You’ll probably be fine. The bill doesn’t explicitly address this situation, but the definition of “principal residence” included in the law focuses on whether a taxpayer owned and occupied a given residential property for at least seven months of the year. It also says you can’t claim more than one property as a principal residence, but doesn’t say anything about what you’re doing with a property other than living on it.

Q: Will family cabins pay the second-home tax?

A: Unless they qualify for the homestead reduction, yes. The new law doesn’t distinguish between family cabins owned by Montana residents and luxury real estate owned by out-of-state residents.

Q: Why doesn’t the second-home tax apply only to out-of-state residents?

Because that would likely be struck down by the courts as unconstitutional discrimination. As legislative attorneys studying tax issues for lawmakers have noted in the past, the U.S. Constitution includes several provisions that have been interpreted as limiting how much power states have to discriminate against nonresidents, particularly with regards to freedom of movement and economic activity. For example, a 1975 ruling by the U.S. Supreme Court barred New Hampshire from imposing higher income taxes on nonresident commuters.

There is some legal nuance involved — the Supreme Court, for instance, ruled in 1978 that Montana could charge nonresidents higher hunting license fees because hunting is a recreational activity involving a state-owned resource. Even so, most legal analysts seem to think lawmakers are on much firmer ground by pegging their definitions to how much time a property owner spends living on or renting a given property, rather than their state of residence.

Q: Will the tax relief force local government budget cuts?

No — at least in theory. The way the state’s property tax system works means that most local taxes “float” to collect a given budget amount. As such, tax bills will generally shift around so lower homeowner taxes are offset by higher taxes on other types of property, primarily businesses under the interim rates for this year, then a combination of businesses and second homes in future years.

The legislation also includes a provision intended to avoid short-term revenue reductions for taxes defined in terms of non-floating mills, a category that encompasses voter-authorized local taxes in some parts of the state.

The other wrinkle is that two of Montana’s municipalities, population-121,000 Billings and population-350 Sunburst, have provisions in their charters that could keep taxes from floating to accommodate the downward valuation shifts produced by the relief legislation. That’s caused particular angst in Billings, the state’s largest city, and spurred lawmakers to include a provision in the tax legislation that purportedly overrides those charters to keep revenues constant. It’s unclear, however, whether that override attempt would survive a court challenge, so the bill includes another provision specifying the state will backfill municipal revenues to 2025 levels if the override clause is struck down.

Q: Where can I read the full second-home tax legislation?

This is actually quite tricky. The new tax policy was passed as two conjoined bills with some redundant language and convoluted coordinating clauses for reasons that have to do with arcane legislative politicking.

If that doesn’t scare you off, start with Senate Bill 542 (text here). However, disregard SB 542’s sections 4 and 14, which were adjusted by provisions in House Bill 231 (its sections 29 and 27, respectively). Note that other coordinating language in HB 231 (its section 31) nullifies most of HB 231’s other contents to avoid redundancy with SB 542.

Q: I tried reading the bills and … how exactly do they provide me with tax relief?

We feel your pain.

Here’s a short answer: Lawmakers are adjusting statewide property tax rates to dial back the tax values for homestead-eligible residential properties. Montana’s property tax math translates your taxable value to your share of the collective bills for schools, roads, law enforcement and other local government services. So scaling down tax values for primary residences while boosting them second homes will shift taxes away from homeowners without defunding services.

The shift will also raise taxes for some business properties — particularly this year, as the interim rates reduce taxes for primary residence before the second-home tax revenue is available next year. The measure does include a provision intended to limit the impact on smaller business properties. 

As for a longer answer? Stay tuned — we’re working on something.

Q: How much will my taxes change?

By the time the second-home tax is fully implemented in 2026, projections from the revenue department estimate the average owner-occupied home will see taxes decrease by 18% and the average long-term rental property will see a 22% decrease.

However, actual changes will vary place to place depending on factors including the composition of the local tax base and how specific counties, cities and school districts are managing their budgets. Bills for individual properties will also depend on shifts in the formal tax valuations due from the revenue department in the coming weeks.

We wrote a separate story about the department’s projections, including visual breakdowns for different property types and county-by-county figures. It’s available here: How Montana’s new second-home tax could shift your property tax bill.

Have questions about the second-home tax and homestead? We’d love to hear from you — and plan to update this piece as new questions pop up and new information becomes available. Reach out at news@montanafreepress.org.