Active-duty and reserve pay
Base pay, special pay and incentive pay for active duty are excluded, as is Guard and Reserve pay on active-duty orders.
An E-5 with over 6 years of service earns $49,320 a year in basic pay. In Montana, that pay is normally excluded from state income tax. Housing and food allowances are never taxed by any state.
Military retired pay
Part of military retired pay can be excluded for a limited number of years, depending on income and residency.
Your state of legal residence decides
Military pay is taxed by your state of legal residence, usually the state you lived in when you joined or one you later adopted by changing your records, not by the state where you are stationed. This comes from the Servicemembers Civil Relief Act. Spouses can choose to use the member's state of legal residence for their own income too.
See your total pay with state tax
Questions
Does Montana tax military pay?
Montana does not tax active-duty military pay. Base pay, special pay and incentive pay for active duty are excluded, as is Guard and Reserve pay on active-duty orders.
Does Montana tax military retirement pay?
Part of military retired pay can be excluded for a limited number of years, depending on income and residency.
Is BAH taxed in Montana?
No. BAH and BAS are not taxable income for federal or state tax in any state.
Which state taxes me if I am stationed in Montana?
Under the Servicemembers Civil Relief Act, your military pay is taxed only by your state of legal residence, not the state where you are stationed. If Montana is not your legal residence, Montana does not tax your military pay.