The 2025 Legislature made major changes to the Montana property tax system. In response to the outcry from homeowners, caused by increased home values in 2023 that resulted in increased property taxes, the Legislature made significant cuts to the statutory property tax rates applied to residential property. These lower tax rates, when applied to value increases in 2023 and 2025 resulted in the taxable value of residential property decreasing for most homeowners.
Taxable value is calculated by multiplying market value by the tax rate. Taxable value is then multiplied by the mill levy to determine taxes. After the new tax rates were applied, taxable value of residential property increased a mere 2%, probably due to new construction.
The market value of residential property increased 48% in 2023 and another 28% in 2025. The increases in market value were offset by the reduction of the tax rate from 1.35% to .76% for most residential property value.
Because residential property is over three quarters of the market value of the State, a reduction in taxable value shifts property taxes to all other types of property as local governments and schools raise their mill levies to maintain current spending levels.
The following graph shows the increase in market value of each class of property, the increase in taxable value, and the expected increase in property taxes on a statewide basis based on modeling done by the Montana Department of Revenue in late summer, prior to local governments and schools setting their mill levies.
As shown in the graph residential property taxes decreased statewide by 3% from 2024 levels. Most other classes of property had double digit tax increases to offset the reduction in residential property. Residential property makes up 79% of the market value of the state so a small percentage decrease in residential property taxes causes large increases in property taxes of other classes.
The content was written by the Montana Taxpayers Association and is shared with permission. For more information on the Montana Taxpayers Association, please visit montax.org.
