If you own property, you might’ve seen a new assessment notice in the mail.
Even if you’re renting, it’s important to know what's happening with property taxes in Montana – because a big increase can get passed along to renters by landlords.
What does this all mean? In short, the legislature’s Republican supermajority failed to respond to property appraisal increases with meaningful long-term tax relief.
HOWEVER, there’s a lot more to it than that, so we’ve developed this comprehensive FAQ.
Side note: Tax policy may sound dry, but it’s a tool that can be used to promote equity: good tax policy can make Montana livable for all. Unfortunately, what the 2023 Republican supermajority ended up doing was the opposite of good tax policy.
Q: I got a new assessment notice for my home, and it seems like my property taxes will go up a lot. Where does this come from and what does it mean?
This notice comes from the State of Montana, specifically the Montana Department of Revenue. It does NOT come from the city or county. It is not a tax bill.
Long story short, the estimated tax amount on this notice isn’t correct. It’s not what you’ll end up paying. For most people, your tax bill will be lower than what’s on the notice, but you won’t know exactly how much until after the city and county finish their budget processes and a tax bill is sent out in November. (Bills are sent in May and November.)
Q: Why is this happening?
Taxable values throughout the state are reassessed by the Montana Department of Revenue every 2 years, and this time real estate values increased on average by 43%. Governor Gianforte and the legislature were told this big jump would happen, and failed to act to provide permanent relief to those who need it.
Q: How do these taxes work?
The state collects a tax on 1.35% of residential property value, without a cap. There are 101 state “mills” (a unit for tax that means one one-thousandth of a dollar) on that 1.35% amount. But what it comes down to is that if your home's value went up 40%, you will pay the state 40% more in tax.
City and county budgets, on the other hand, are capped and can only increase at half the average rate of inflation for the past three years, which is 2.46% for this year’s budget. When values change in the area, local governments have to reevaluate their mills (check out this Montana Free Press article for a great explanation, with pictures!), and redistribute the tax burden accordingly. The total amount, though, won’t go up nearly as much as what the state is taking. It’s a little more complicated than that due to fees and special assessments, but the general idea is that if your house’s value increased similarly to your neighbors’, the portion of your property tax going to city and county budget will go up only very slightly. If you made big improvements to your property, that likely means a larger increase.
On that note, Missoula was ranked as the 10th best-run city in the US by Wallet Hub, with special praise for its low per-capita budget.
Q: Why do we pay property taxes?
Property taxes support local schools, infrastructure like roads and bridges, and public services like firefighting and snow removal.
Montana's tax structure is heavily skewed towards property taxes. Montana doesn't have a sales tax. The legislature has also forbidden local governments from enacting local option taxes like a gas tax or even (for towns with more than 5,500 people) a resort tax. So if the legislature keeps giving income tax cuts to the rich (more below!), our property taxes are going to make up the difference.
Q: Could the Governor or the legislature have prevented this big property tax increase?
Yes. The Revenue department warned Governor Gianforte and legislators that if they didn’t take action, the 43% increase in taxable property values would mean total state property taxes would increase by $81 million this year.
Back in November, the Revenue department even calculated how much the state should reduce its tax rate to avoid hiking bills – for residential property, going from 1.35% down to 0.94%. They sent a memo to the Revenue interim committee about this on November 17 -- but the Governor and legislators still didn’t do anything. This suggested decrease would have equated to $124.23 in savings on a house worth $300,000.
Q: I heard something about property tax rebates, and got a postcard in the mail. Am I getting a tax rebate?
Yes, the legislature did pass a property tax rebate of up to $675, which eligible homeowners can apply for starting on August 15 and again next year. This excludes renters and those who have recently purchased a home. You MUST apply, it’s not automatic, and the Department of Revenue will have an online form.
However, the rebate you may see from the state will largely be eaten up by the state’s de facto increase in property tax. The Republican supermajority hopes people cash this $675 check and think they’re getting meaningful tax relief. However, the rebate is only for two years (2023 and 2024), and the state’s portion of property taxes will stay high.
Q: What’s the backstory here? Why didn’t they fix the problem?
In the 2023 Montana legislature, with its Republican supermajority, had a $2.5 BILLION surplus to spend. Unfortunately, they chose to use it on tax breaks that largely benefited rich Montanans and corporations (examples below!). With just a few exceptions, they chose not to make meaningful investments in services or infrastructure, either.
Were there attempts to fix the problem? Absolutely – for instance, there was a bill by Rep Jonathan Karlen (D-Missoula), HB280, which would have put in a "circuit breaker" to permanently help not only property owners, but also renters, offsetting property tax costs that may be passed on to them in the form of higher rents. Republicans voted this bill down.
Q: What DID the Republican supermajority do with taxes?
Well, the main effect of what they did was to give money back to the richest Montanans. You can read more here if you like. Some highlights:
- HB221 cut the effective rates for the state’s capital gains tax, reducing state revenues by $16 million per year. Capital gains taxes are paid by people with income from investments – so this almost exclusively benefits the rich.
- SB121 reduced the state’s top-bracket income tax rate from 6.5% to 5.9%, which will cost the state around $150 million per year – money that now remains with high earners. This top tax bracket rate was already cut in 2021 by the Republican majority, from 6.9 to 6.5%.
- HB212 raised the exemption threshold for business equipment from $300,000 to $1 million, meaning that business owners now don’t pay tax on the first million dollars of equipment they own. This will cost the state $9 million, and generally benefits larger businesses.
Q: I’m mad about this. I don’t want my taxes to increase while the richest Montanans pay less. What can I do?
We’re mad too. And we advocate for taxing the rich, second homes, and large corporations MORE so that regular people can pay less, and aren't suffering under the burden of increasing taxes. This is completely possible. Shifting the tax burden towards regular folks was a CHOICE made by the Republican supermajority in 2023, despite a historic opportunity to make Montana more livable and affordable with some of the $2.5 billion surplus.
Want things to change? Volunteer with us, ELECT DEMOCRATS, and bring your energy to join ours! On missoulademocrats.org sign up under the "volunteer" page, email [email protected] with questions, or become a supporting member here.
If you feel there truly was a mistake with your home appraisal and you’d like to dispute it, you can do that here.