Montana has passed a new property tax law that significantly impacts out-of-state homeowners—especially those from California. The law aims to lower taxes for full-time Montana residents while increasing taxes on second homes and short-term rentals.
Why the Change?
Montana home prices have jumped nearly 58% since 2020. Much of that growth comes from an influx of out-of-state buyers—many from California—purchasing second homes or vacation rentals. In 2021, second homes made up nearly 20% of all home sales in the state.
What the New Law Does
The law introduces new property tax rates based on how the property is used:
- Primary residences and long-term rentals under $340,000: Taxed at 0.76%
- Homes above $340,000: First $340,000 taxed at 0.76%, excess taxed at 1.9%
- Second homes and short-term rentals (e.g., Airbnb): Taxed at 1.9% of full value
This directly affects California owners, who hold over $9.5 billion in Montana real estate. Many will now face much higher annual tax bills.
Goal: Shift the Tax Burden Fairly
Montana officials say the law brings more balance. Out-of-state owners currently hold 5% of taxable real estate but contribute just 3.54% in property tax revenue. Meanwhile, Montana residents pay 84% of all residential property taxes.
A typical Montana homeowner with a $360,000 home could save about $719 per year in taxes.
Concerns and Criticism
Some lawmakers and experts argue the change isn’t true reform—it just shifts the tax burden. There are also worries it could distort housing markets, benefiting wealthier areas while hurting others.
Impact on California Homeowners
If you own a Montana second home, expect higher costs. A $750,000 vacation property could now bring a $14,250 annual tax bill. This may prompt some owners to:
- Sell their Montana properties
- Convert them into long-term rentals
- Reassess their investment strategy
Final Thoughts
Montana’s property tax changes aim to support local residents—but out-of-state owners, especially from California, could feel the financial strain. The long-term impact on housing trends and local markets is still unfolding.
References
Californians Who Bought Up Montana Property Will Soon Feel a Major Tax Burden on Their Second Homes
