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If you're looking for a beautiful, attractive place to live or rent out a real estate property, Montana is one of the best options.
The Treasure State is known for its natural beauty, vast open spaces, impressive skies, diverse wildlife, and many other attractions.
Additionally, although financing costs are often high, the Montana housing market is resilient and brings many opportunities to landlords, real estate investors, and property managers.
Do you want to join the housing business? Have you already bought a property in Montana and plan to rent it out? In both scenarios, understanding property taxes is essential!
Real estate taxes have a significant impact on people's financial situation. Therefore, you should understand the ins and outs of the Montana tax system to develop an effective strategy to save or maximize your investment.
If you need help, you were lucky enough to find us. We've created a comprehensive guide on Montana property taxes, so you can understand your property tax obligations.
Are you a landlord or property manager looking for software to improve your property management accounting and more? Schedule a free demo and see how DoorLoop can help you.
Understanding Different Types of Property Tax Bills in Montana
Essentially, property tax dollars are the source of revenue that local government units need to fund projects and services, including schools, roads, fire departments, law enforcement, and more.
As a result, these units largely determine property tax rates in this state. The county where the property is located defines the exact property tax levy, for example.
That's why the tax rate in Missoula County is 0.93% of the median home value, which is the highest property tax in Montana, but it's only 0.84% in Wibaux County.
Montana also classifies the different types of property for tax purposes. These are the main categories:
- Residential property
- Personal property
- Commercial or business property
- Agricultural land
- Forest land
- Mobile and manufactured homes
- Centrally assessed property
How Many Times Do You Pay Property Tax a Year in Montana?
The Property Assessment Division should appraise and value residents' properties to send property classification and appraisal notices as required.
After that, homeowners must pay property taxes twice a year:
- First installment: The first half of the property tax amount is due by the close of business on November 30 of the current year or 30 days after the tax notice is postmarked. It's considered "delinquent" after 5:00 p.m.
- Second installment: Property owners should pay the second half of the tax amount on or before May 31 of the following year. It's considered "delinquent" after 5:00 p.m.
Before 2015, state assessors used to reappraise residential properties once every six years. However, reappraisal is now required once every two years.
Properties should be reappraised to match the current market value.
Consequences of Late Payments
If you don't pay Montana property taxes on time, you can be penalized with late fees. Also, local government officials can place a lien on your property or sell it at a tax sale.
Penalties
In Montana, delinquent property taxes draw a penalty of 2% and interest at the rate of 5/6 of 1% a month from when you miss the deadline until the debt is paid. These rules apply to the first installment.
If you don't pay the second half of your property taxes before the due date, you must also pay interest of 1% per month at a rate of 5/6 and add 2% to the delinquent property taxes until paid.
Liens
Liens work as collateral for debts. If you don't pay your taxes on time, the county treasurer may place one on your property.
If this occurs, the county treasurer is required to publish a notice in a qualified newspaper or three public places on or before the last Monday in June.
This notice should state that delinquent taxes are a lien upon the property after including interest and penalties. Also, the statement should note that taxpayers can avoid this if they pay the amount owed before the specific date.
How to Pay a Property Tax Bill in Montana
In Montana, county treasurers are responsible for billing and collecting property taxes each year.
If you want more information on the different methods to pay taxes, you should contact their offices.
However, each county usually has several options, including payments online, by mail, by debit or credit card, by electronic check, and more.
How Much Is Property Tax in Montana?
Montana has relatively low property taxes. In this state, the average effective property tax rate is only 0.74%. It's also below the national average. The latest figures show that the US mark is 0.99%.
However, property tax rates vary depending on several factors.
A person living in Gallatin County pays a median property tax amount of $1,889, while homeowners in Flathead County pay $1,777.
Other counties have even lower median property taxes, such as Big Horn County ($839), Treasure County ($603), and Petroleum County ($553).
Why does this happen? What factors influence property tax rates?
As mentioned, state and local government units play a key role in tax assessment, management, and administration. Here's a list of the parties involved in this process:
- State Legislature: It establishes a statewide property tax policy with valuation methods, tax rates, property classes, limits, appeal procedures, and more.
- Taxing Jurisdictions: Different units set budgets and mill levies to collect taxes, including school districts, cities, counties, and special districts.
- Department of Revenue: The Montana Department of Revenue should administer the tax policies set by the Legislature. These tasks include classifying properties and providing taxable property values.
- County Treasurers: They bill and collect taxes that should be distributed to taxing jurisdictions.
How is Property Tax Calculated in Montana?
Since there are multiple parties involved, Montana uses complex math to calculate property taxes. However, we'll explain this process below.
First, let's clarify that Montana property tax rates are expressed in mills, which equals $1 for every $1,000 of taxable value.
Now, let's take a look at how Montana property taxes are calculated: Market Value x Tax Rate (Taxable Value) x Mill Rate/1,000 = Taxes
Although it seems complex, it's easier than you think.
Essentially, you should multiply the market value by the tax rate, which results in the taxable value.
After that, you have to multiply the taxable value by mill levies, and that's it. The sum is equal to your property taxes.
How Can I Lower My Property Taxes in Montana?
Whether you live in a county with higher property taxes or just want to save on your annual expenses, there are legitimate ways to reduce your property tax bill. Let's review each one.
Appeal the Assessed Value of Your Property
If you believe your property value was assessed above the actual market value, you can appeal the assessment.
In Montana, property owners must do this process through the County Tax Appeal Board, which is an independent body. It isn't related to the Department of Revenue but is appointed by the County Commissioners.
Taxpayers can appeal the assessment within 30 days of the date they receive the notice of classification and appraisal from the Montana Department of Revenue, which is often mailed in June.
You can also appeal the assessed property value 30 days after you receive the Department of Revenue's decision. This applies after an informal review under Form AB-26.
It's important to note that taxpayers are required to start the appeal process before the tax bill arrives.
Consider Exemptions and Abatements
Montana homeowners can also reduce their property taxes through the following exemptions and abatements:
- Abandoned Mobile Home Tax Exemption
- Agricultural Processing Facilities Exemption
- Air or Water Pollution Control and Carbon Capture Equipment Certification
- Ammunition Manufacturing Tax Exemption
- Separate Assessment of Undivided Interest in Mining Claim Property
- Tax Exemption and Tax Rate Reduction for Remodeling, Reconstruction, or Expansion of Existing Buildings or Structures
- Fiber Optic or Coaxial Cable Exemption
- Mobile Home Park Exclusion
- New or Expanding Industry Classification
- Property Tax Exemption
- Property Tax Exemption for Installation of an Alternative Energy System
- Purchase Incentive Rental Agreement
- Temporary Tribal Tax Exemption
- Termination of New or Expanding Industry Property Tax Abatement
Relief Programs
In addition, Montana has several relief, assistance, and reduction programs to help certain individuals lower their property taxes. These are:
- Land Value Property Tax Assistance Program (LVPTAP)
- Montana Disabled Veteran Assistance Program (MDV)
- Natural Disaster Forest Land Reduction
- Natural Disaster Property Tax Reduction
- Property Tax Assistance Program (PTAP)
Important Propositions for Real Estate Investors in Montana
Montana lawmakers haven't passed propositions affecting property taxes recently, but one is reportedly in its working states.
CI-121 is a property tax initiative or Constitutional amendment proposed in the 2022 ballot. However, it fell short of the signatures required to go before voters.
This initiative sought to cap the growth of residential property tax by basing the property's assessed value at 2019 rates and limiting increases to just 2% each year.
In addition, CI-121 was designed to limit total residential property taxes to 1% of a property's assessed value. The main objective is to prevent homeowners from being priced out.
However, supporters are trying to place a similar measure on next year's ballot.
Currently, Montana limits taxes levied on certain property classes under I-105, which was enacted by voters in 1986.
Conclusion
Montana is an attractive place for homebuyers, real estate investors, and property managers.
However, understanding the Montana tax system is just as important as knowing the state's wonders.
If you understand how property taxes work in this state, you'll be able to calculate your bills and develop an effective tax strategy.
In addition, you'll know the exemptions, appeals, and other legitimate ways to lower these amounts to reduce your tax burden.
If you still have doubts or questions about property taxes in Montana, ask a tax professional for guidance.
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.
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