Montana New Property Tax Law.

If you own a second home or vacation property in Flathead County, there’s a new tax law on the table that could significantly affect your property tax bill over the next couple of years. Designed to give some relief to full-time Montana residents, the law introduces a new tiered tax system that separates primary residences from second homes and short-term rentals. In simple terms: if you live here year-round, you’ll likely see a tax break. If your property is a vacation home or a rental listed on Airbnb or VRBO, you’re going to see an increase.

Here’s how it works. Starting in 2025, primary residences—homes where the owner lives at least seven months out of the year or rents to a long-term tenant—will be eligible for a “homestead exemption.” This will lower the tax rate on your home from 1.35% down to about 0.76%, depending on the value of the property. The goal is to ease the financial burden on Montanans who actually live and work here full-time, especially with recent home value reappraisals causing property taxes to spike.

On the flip side, if your home doesn’t qualify as a primary residence—meaning it’s a vacation home, second property, or short-term rental—you’ll see your tax rate increase. In 2025, these properties will still be taxed at 1.35%, but in 2026 the rate jumps to about 1.9%. That could mean a 68% increase in property taxes for some second-homeowners. This shift is intended to push more of the tax responsibility onto out-of-state owners and those profiting from short-term rental income, helping relieve pressure on local families.

There are a few important dates to be aware of. If your home qualifies as your primary residence, you’ll need to apply for the homestead exemption by March 1, 2026. There’s also a $400 property tax rebate available in 2025, and you must apply for it between August 15 and October 1, 2025. Make sure you’re checking your mail—official notices and instructions are being sent out from the Department of Revenue.

So what’s the big picture here? The new law is designed to protect full-time residents from rising property taxes and to create a more balanced tax structure, especially in counties like Flathead where tourism and out-of-state buyers have driven up housing costs. The upside is lower taxes for Montanans who live in their homes year-round. The downside is higher taxes for those with second homes or vacation properties, including many locals who’ve owned family cabins for generations.

If you're concerned about your second home being taxed at the higher rate, you might have options. If you can turn your property into a long-term rental for more than seven months out of the year, or if a family member can live there full-time, you may be able to reclassify it and get the lower rate. It's worth speaking with a tax advisor or contacting your local county treasurer’s office to explore your options.

In short, if you live in your home year-round or rent it long-term, you're likely going to benefit. But if you’re holding onto a second home or using it as a short-term rental, now is the time to prepare for a bigger tax bill.

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