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Montana Does Not Tax Active-Duty Pay — but AGR Pay Is Not Covered

A Montana resident serving on active duty in the regular armed forces subtracts that salary from Montana taxable income, as does a resident on National Guard active duty under federal homeland-defense or contingency-operation orders. The line to be careful about is that the Department of Revenue treats AGR PAY AS NOT EXEMPT — a full-time Guard technician on Active Guard Reserve status is outside this. Documentation of military status must go with the return. Legacy WWI, Korean and veterans' bonus payments are also subtractable under the same statute.

Verified August 27, 2026

What this benefit is

A Montana resident serving on active duty in the regular armed forces subtracts that salary from Montana taxable income, as does a resident on National Guard active duty under federal homeland-defense or contingency-operation orders. The line to be careful about is that the Department of Revenue treats AGR PAY AS NOT EXEMPT — a full-time Guard technician on Active Guard Reserve status is outside this. Documentation of military status must go with the return. Legacy WWI, Korean and veterans' bonus payments are also subtractable under the same statute.

What it's worth: Qualifying active-duty salary subtracted from Montana taxable income in full

  • Covers Montana residents on active duty in the REGULAR armed forces.
  • Also covers Montana residents on National Guard active duty under FEDERAL HOMELAND-DEFENSE OR CONTINGENCY-OPERATION orders.
  • THE DEPARTMENT OF REVENUE TREATS AGR PAY AS NOT EXEMPT. Active Guard Reserve status is outside this subtraction.
  • DOCUMENTATION OF MILITARY STATUS must be filed with the return.
  • Legacy WWI, Korean and veterans' bonus payments are also subtractable under MCA 15-30-2120(3)(c)(iv).
  • The saving depends on your pay and Montana's rate for the year.

Who is entitled to it

  • You serve or served in the U.S. armed forces.
  • You are serving on active duty.
  • Montana sets this subtraction.

Not sure whether that describes you?

Answer a few questions about this benefit specifically — we only ask what this one actually depends on, and we stop as soon as we know.

How to claim it

Deadline: With the annual Montana return
  1. 1Take the subtraction on the Montana return and attach documentation of your military status — the Department asks for it.
  2. 2If you are on AGR status, do not claim it. Revenue's position is that AGR pay is not exempt, and a claim will be adjusted.
  3. 3Guard members on federal homeland-defense or contingency orders DO qualify — attach the orders showing the authority.
  4. 4If you received a legacy WWI, Korean or veterans' bonus payment, subtract that too under the same statute.
  5. 5Check earlier returns if the subtraction was missed, and ask Revenue about amending within the statutory period.
Form
Montana individual income tax return, with military documentation
File with
Montana Department of Revenue
Annual
Claimed once a year.
Worth knowingThe AGR exclusion is Revenue's stated position rather than a line in the statute. Ask before claiming if your status is anything other than plain active duty.

Sources

This finder provides an informational match, not a government eligibility determination. The responsible agency decides your application.