Montana homeowners who live in their primary residence stand to see property tax bills drop by roughly 18 percent starting this year, after the 69th Legislature passed House Bill 231 and created a new homestead tax category. The law, which takes effect for tax year 2026, lets qualifying owners apply through the Department of Revenue for a reduced rate. Gov. Greg Gianforte has announced that the online application portal is open and that auto-enrollment applies to some owners who previously received a property tax rebate.
Why the homestead rate split changes Montana tax bills now
The core shift is structural. Before HB 231, all residential property in Montana was taxed at the same rate regardless of whether the owner lived there. The new law carves out a lower rate for principal residences and long-term rentals, while second homes, vacation properties, and short-term rentals remain at the prior schedule. The Department of Revenue’s rate comparison shows this divergence across 2024, 2025, and 2026, making the gap between qualifying and non-qualifying parcels visible for the first time in a single official document.
That split creates a practical tension. In counties where assessed home values have climbed fastest over recent reappraisal cycles, the dollar savings from the reduced rate will be largest, because the rate cut applies to a higher taxable value. Owners who qualify will pay measurably less than neighbors whose properties do not meet the principal-residence or long-term-rental test. By 2027, when a full year of data is available, effective tax rates between these two groups could diverge significantly, especially in high-growth markets like Gallatin, Flathead, and Missoula counties.
The timing also matters for local governments. Because the homestead category takes effect in the middle of an ongoing property value surge, counties and school districts will be recalculating mill levies and revenue expectations while taxpayers are still absorbing the last reappraisal’s sticker shock. Officials will need to decide whether to adjust levy rates to maintain revenue or allow some of the homestead savings to flow directly to homeowners as a net tax cut.
How HB 231 defines eligibility and the application process
The statute itself, codified in Montana law, spells out who qualifies. Beginning in tax year 2026, an owner may claim the homestead rate on one principal residence, defined as the dwelling where the owner lives for the majority of the year. The same reduced tier also applies to certain long-term rental properties, so long as they are leased on a non-transient basis and do not operate as short-term vacation rentals.
HB 231, as reflected in the enrolled bill, goes beyond simple eligibility. It directs the Department of Revenue to create an application system, authorizes the agency to verify information against other state records, and establishes penalties for willful misrepresentation. If an owner no longer occupies the property as a principal residence, or converts it to a short-term rental, the law requires that the homestead classification be terminated and any improper benefit may be subject to repayment with interest.
Some homeowners will not need to take any action. According to the governor’s announcement, Montanans who previously received a state property tax rebate tied to their primary home may be auto-enrolled into the homestead category, so long as ownership and occupancy have not changed. For everyone else, the Department of Revenue’s online portal serves as the main entry point. Applicants must attest that the property is their primary residence or a qualifying long-term rental, provide identifying information, and submit before their county’s assessment deadlines to ensure the lower rate appears on 2026 tax bills.
Owners with multiple properties should be careful. Because only one dwelling can receive the principal-residence benefit, falsely claiming the homestead rate on a second home could expose applicants to the law’s civil penalties. Likewise, landlords who mix long-term leases with occasional short-term stays will need to review their use patterns to avoid inadvertently disqualifying a property from the reduced tier.
What the homestead tax cut leaves unanswered
Even as the homestead category promises relief for many owner-occupants, it leaves several policy questions unresolved. The first is how much of the shift will be borne by non-homestead properties. If local governments hold total levy revenue constant, second homes, short-term rentals, and commercial parcels could shoulder a larger share of the overall tax load, intensifying debates in resort communities already wrestling with housing affordability and tourism impacts.
A second uncertainty is administrative. The state has built an online system and outlined verification tools, but the scale of applications-potentially hundreds of thousands of parcels-will test the Department of Revenue’s capacity. Errors in classification, delays in processing, or confusion about auto-enrollment could lead to appeals and uneven implementation across counties in the early years.
Finally, the homestead rate does not address the underlying volatility of Montana’s property tax system, which is driven by periodic statewide reappraisals. If market values continue to rise faster than incomes, the relief from a lower rate may be partially offset by higher assessed values over time. For now, though, HB 231 marks a significant structural change: it formally distinguishes between homes people live in and properties they hold as investments, and it puts real money on the line for both groups as the 2026 tax year approaches.
