Montana fully conforms to federal §168(k) via rolling IRC conformity — STR investors get 100% of the federal bonus deduction on the Montana return with no add-back. Federal and state savings stack, delivering extra Year-1 tax relief for property acquired and placed in service after January 19, 2025. Compare Montana's treatment to every other US jurisdiction in the complete state-by-state conformity map.
Modeled on a $150,000 federal §168(k) deduction. Run your own numbers in the Conformity Tool →
How Montana adopts §168(k) — the rolling conformity mechanic
Montana adopts the Internal Revenue Code by reference on a rolling basis for individual income tax purposes. When Congress amends the IRC — as it did when the One Big Beautiful Bill Act (OBBBA, P.L. 119-21) restored 100% bonus depreciation permanently for property acquired and placed in service after January 19, 2025 — Montana automatically adopts the new federal treatment without needing separate state legislation.
The controlling statute, Mont. Code Ann. §15-30-2101, incorporates the IRC by reference. There is no Montana-specific modification for bonus depreciation, so §168(k) flows through from the federal return to the Montana return without adjustment.
Static-conformity states required legislation to adopt OBBBA. Montana didn't.
Worked example — $150,000 federal deduction plus extra Montana savings
Consider a Montana STR investor with a $150,000 Year-1 §168(k) deduction on a short-term rental acquired and placed in service after January 19, 2025. Assume the investor is in the 37% federal bracket and pays Montana's 5.65% top marginal rate.
| Line | Amount | Notes |
|---|---|---|
| Federal §168(k) deduction | $150,000 | OBBBA 100% bonus |
| Federal Y1 tax savings @ 37% | $55,500 | Ordinary bracket |
| Montana state deduction | $150,000 | Full conformity, no add-back |
| Montana Y1 state tax savings @ 5.65% | $8,475 | Top marginal rate |
| Total Year-1 combined savings | $63,975 | Federal + Montana |
Because Montana incorporates the IRC by reference, there are no basis differences to track and no separate depreciation schedule to maintain across the property's holding period.
The statute explained
The controlling Montana authority is Mont. Code Ann. §15-30-2101, which incorporates the Internal Revenue Code by reference on a rolling basis. Because no modification is specified for §168(k) bonus depreciation, the federal deduction reduces Montana taxable income dollar-for-dollar.
How Montana compares to decoupled states
The contrast with decoupled Mountain West states is significant. In California, an STR investor with the same $150,000 federal deduction adds back the entire amount on the state return — giving up roughly $19,950 in Year-1 state tax savings at California's 13.3% top rate. Idaho, Arizona, and about two dozen other jurisdictions impose similar 100% add-backs.
Montana investors face none of that. The federal deduction flows through unchanged, and the extra $8,475 in state savings stacks on top of the federal $55,500. To compare Montana against any decoupled state at any deduction amount, use the state conformity tool.
What this means for your STR purchase decision
Montana's full conformity is a real underwriting advantage. When you're evaluating a Bozeman, Whitefish, Big Sky, or Missoula-area STR purchase, you can price in both federal and state Year-1 tax savings at underwriting — not just the federal deduction. On a mid-sized property with $150,000 in bonus-eligible components, that's an extra $8,475 in first-year cash flow.
The qualifier: the property must be acquired and placed in service after January 19, 2025 to qualify for OBBBA's 100% federal bonus. Pre-January 19, 2025 acquisitions fall under the earlier phaseout schedule.
Before you make an offer, run the address on your property to see the calibrated Year-1 bonus-eligible dollar amount — DepreciMax reports classify every finish as 5-year, 15-year, or 39-year and quantify the federal plus Montana state savings.
Analyze a specific Montana property
Run any Montana STR listing through DepreciMax's $99 property report — line-item finish classification with Montana-specific state impact math.
Frequently asked questions
Do I get bonus depreciation on both my federal and Montana return?
Yes. Montana has rolling IRC conformity under Mont. Code Ann. §15-30-2101 and adopts §168(k) automatically. STR investors claim the full federal 100% bonus deduction, and it flows through to the Montana return with no add-back. For property acquired and placed in service after January 19, 2025, OBBBA's permanent 100% bonus applies at both the federal and Montana levels.
What is Montana's top individual income tax rate?
Montana has a top individual income tax rate of 5.65%. On a $150,000 federal §168(k) deduction, a Montana STR investor picks up roughly $8,475 in additional Year-1 state tax savings on top of the federal deduction.
Does Montana plan to change its §168(k) conformity in 2026?
No public legislation is pending to decouple Montana from federal §168(k) for 2026. Because Montana adopts the IRC by reference on a rolling basis, changes would require the legislature to add a new modification — which has not been proposed.
What happens on sale — does Montana recapture bonus depreciation?
Montana follows federal basis and federal §1245 / §1250 recapture rules because the state allows the full federal §168(k) deduction. There is no separate Montana recapture calculation for bonus depreciation; recapture flows through federal income to Montana taxable income unchanged.
Does Montana conformity apply to §179 as well?
Yes. Montana conforms to federal §179 expensing at the federal cap without a separate state limit. STR investors can layer §179 (for qualifying tangible personal property) on top of §168(k) at both the federal and Montana levels, subject to federal §179 income limits.
Every state's §168(k) position, in one place
Interactive map, sortable table, and deep-dive guide for each of the 51 jurisdictions — post-OBBBA verified.
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