New law hikes property tax rates for Montana short-term rentals

Property taxes will go up for many short-term rentals (STRs) in Montana under a new law that aims to reduce property taxes for primary residences and raise taxes on other types of properties.

Under the measure, the property tax rate for “homestead” properties will go down beginning in 2026. This category includes primary residences, long-term rental properties (rented to tenants on a minimum monthly basis for at least seven months a year), agricultural properties, and smaller commercial properties. Homeowners are required to apply for the homestead exemption, but if they don’t apply in time and receive higher tax bills, they can appeal. 

At the same time, second homes and higher-value properties will take on more of the property tax burden with higher rates. According to a preliminary state analysis, the new plan will lower property taxes for primary residences by 18% over two years, while non-homestead residential properties (including second homes and short-term rentals) will face an average 68% increase in property taxes by 2026. The exact rates will vary by location.

Since the measure passed late in this year’s legislative session, the state will use interim rates for 2025. Rates for properties valued at less than $2 million will come down, while rates for homes with higher values will increase. Homeowners can get a one-time $400 rebate for 2025 for primary residences (homes they live in for at least seven months of the year). Those who qualify for the rebate this year will automatically have homestead status going forward, unless ownership or primary residence status changes.

Property taxes aren’t the only type of tax affecting STRs in Montana. Lodging taxes also apply. While guests pay these taxes, operators are responsible for collecting and remitting them to tax authorities.

Before collecting lodging taxes in Montana, operators are legally required to register with the Montana Department of Revenue. Depending on the jurisdiction, they may also be required to register with the local tax authority and file local lodging tax returns. 

Montana lodging taxes include state lodging facility sales and use tax, administered by the Department of Revenue. Local resort tax and tourism business improvement district (TBID) fees depend on location and are administered by local jurisdictions.

In Montana, charges that are integral to the stay are taxable. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. Meals, transportation, entertainment, laundry services, or similar charges are not subject to lodging taxes as long as they’re stated separately.

STR marketplaces, such as Airbnb and Vrbo, are required to collect state lodging taxes from guests when a rental is paid for. However, marketplaces may not collect locally administered taxes. If taxes aren’t being collected for you, you’re responsible for collecting and remitting lodging taxes to state tax authorities.

Avalara MyLodgeTax can help STR hosts automate and simplify city and state lodging tax compliance, from registration to tax return filing. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers. For more on lodging taxes in Montana, see our state vacation rental tax guide.