Federal
Montana TRS benefits are taxable. Montana TRS withholds federal tax per IRS Form W-4P and issues a 1099-R each January.
Montana TRS web page: Taxes and Deductions; Tax Withholding on Monthly Benefits fact sheet (Mar. 26, 2026), p. 1Montana
A portion of the benefit may be taxable for Montana income tax. Montana TRS withholds Montana tax only on request (Form 115) and can't withhold for other states. From tax year 2024 Montana starts from federal taxable income, repealed the partial pension, annuity and IRA deduction, and gives taxpayers 65 and older a $5,500 subtraction ($11,000 if both spouses on a joint return are 65+), adjusted for inflation from tax year 2025.
Tax Withholding on Monthly Benefits fact sheet (Mar. 26, 2026), p. 1; Montana TRS web page: Retirement Prep (FAQ on Montana withholding); Montana DOR, Montana Tax Simplification Resource HubCounty and city
Benefits are exempt from county and municipal taxes (except refunds of picked-up contributions).
MCA 19-20-706(1)Montana's 65+ subtraction
Single filer 65 or older: $5,500. Joint return, both spouses 65 or older: $11,000. Under 65: $0. These are the 2024 figures; Montana adjusts them for inflation from 2025, and our sources don't give the newer amounts.
Tax Withholding on Monthly Benefits fact sheet (Mar. 26, 2026), p. 1; Montana TRS web page: Retirement Prep (FAQ on Montana withholding); Montana DOR, Montana Tax Simplification Resource HubThe DOR page gives $5,500 ($11,000 joint) for tax year 2024 and says it is inflation-adjusted from 2025, without the new amount.
$5,500 / $11,000 labelled tax year 2024
What would settle it: Montana DOR Form 2 instructions for 2025 or 2026.
The facts
- Montana TRS benefits are taxable. Montana TRS withholds federal tax using Form W-4P and Montana tax only if you ask (Form 115). It can't withhold for other states.Tax Withholding on Monthly Benefits fact sheet (Mar. 26, 2026), p. 1; Montana TRS web page: Taxes and Deductions
- From tax year 2024, Montana dropped its partial pension exclusion. Taxpayers 65 and older get a $5,500 subtraction ($11,000 if both spouses filing jointly are 65+), adjusted for inflation from 2025.Montana DOR, Montana Tax Simplification Resource Hub
- Montana TRS benefits are exempt from county and city taxes.MCA 19-20-706(1)
Refunds
A refund is taxable unless you roll it over. Montana TRS withholds 20% federal tax on a cash refund, and the IRS may add a 10% penalty under 59 1/2. MCA 19-20-603; Withdrawing TRS Membership fact sheet (Apr. 10, 2026), pp. 1-5; Leaving Employment flyer (June 4, 2025), p. 1; Montana TRS web page: Understand Your Benefits (Interest rate) See leaving teaching.
This page is general information, not tax advice. Ask a tax preparer about your own return.
Questions
Is my Montana TRS pension taxable?
Yes, for federal income tax. Montana TRS withholds federal tax using your Form W-4P and sends a 1099-R each January. Montana income tax may apply too; Montana TRS withholds it only if you ask (Form 115).
Does Montana tax teacher pensions?
From tax year 2024 Montana dropped its partial pension exclusion. Taxpayers 65 and older get a subtraction instead: $5,500 for tax year 2024 ($11,000 if both spouses on a joint return are 65+). It's adjusted for inflation from 2025; check the current amount.
Do counties or cities tax it?
No. Montana TRS benefits are exempt from county and city taxes.
Source: Montana TRS: Understand Your Benefits (web page) and fact sheets, Fetched Nov. 12, 2026; fact sheets revised 2019-2026, fact sheets: Tax Withholding on Monthly Benefits p. 1; Withdrawing TRS Membership pp. 1-5. Also: Montana TRS web pages: Taxes, Deductions, Retirement Prep; Montana Department of Revenue, Tax Simplification Resource Hub; Leaving Employment flyer (June 4, 2025); MCA §§ 19-20-603, 19-20-706. Last reviewed .