Understanding Your Property Tax Bill: A Step-by-Step Guide            Part 1 (Series on Property Taxation in Montana)

Property tax statements can often be confusing, and filled with unfamiliar codes, values, and terminology. If you're like many homeowners, you might find it easier to simply pay the bill rather than uncode the details. Understanding your property tax statement is essential, as errors can occur, potentially leading to overpayment.

In this post, we'll explain the key components you need to understand your annual property tax statement better:

1. Market Value: Estimated price a property would sell in the current market.
2. Taxable Percent: Rate applied to your property’s market value to determine the taxable portion of your property.
3. Taxable Value: Value of your property subject to taxation.
4. Mill Levy: Property tax rate.
5. Property Tax:  Amount of taxes owed.

With these in mind, you'll have a clearer picture of how your property taxes are calculated and what factors influence your taxes owed.

1.  Market Value

Market value refers to the estimated amount a property would sell for in an open market under normal conditions. It represents the price that a willing buyer and seller would agree upon in a transaction. Market value is the foundation of the property tax system and plays a key role in determining a property owner's share of the total tax burden.

a.  How Market Value Is Determined in Montana

In Montana, the Department of Revenue (DOR) is responsible for appraising properties to determine their market value. Each property is categorized into one of 16 property classes, based on their use, ownership, and specific legal provisions. There are valuation methods specific to each class, ensuring that all properties within a class are assessed using the same methods.

Montana operates on a valuation cycle, meaning properties are periodically reassessed based on current market conditions and updated data. For instance, residential properties were reassessed in 2023 for the 2023-2024 cycle, with the next reassessment scheduled for 2025.

To provide transparency, the Montana Cadastral database offers a search tool where the public can access detailed information on property values and taxes for any Montana property.

Example

In 2022, an example residential property located in Bozeman was appraised by the DOR with a market value of $458,300.

b.  Appealing the Property’s Value

If a property owner believes their assessed market value is incorrect, they have the option to appeal the appraisal. This process typically involves submitting supporting evidence, such as recent sales data from comparable properties or an independent appraisal. For detailed instructions on how to file an appeal, visit the DOR’s website.

2.  Taxable Percent

The taxable percent determines how much of a property’s market value is subject to taxation. The Montana State Legislature sets the taxable percent for each class of property. In 2024, there were 1,145 distinct property class codes, each with its own taxable percent. However, most properties in Montana fall under one of four primary class codes:

1. Residential City/Town Lots 1.35% of market value.
2. Commercial City/Town Lots 1.89% of market value.
3. Tillable Land 2.16% of production value.
4. Forestland 0.27% of production value.

Example

For the example statement, the property class is residential city/town lot and has a taxable percent of 1.35%.

3.  Taxable Value

In Montana, the taxable value refers to the portion of a property’s market value that is subject to taxation. It is determined using the market value, the taxable percent, and any applicable exemptions:

Example

In the example tax statement, the market value is $458,300, the taxable percent is 1.35%, and there are no applicable exemptions. Thus, the taxable value is $6,187. 

a.  Exemptions

In Montana, property tax exemptions are determined by property class codes. Each property class has different types of exemptions that can reduce or eliminate taxable value. For further details, check the Montana Department of Revenue website for the most up-to-date information on exemptions and eligibility criteria.

4. Mill Levy

The mill levy is the property tax rate applied to the taxable value of the property.

For example, a property with a taxable value of $6,187 will pay $6.19 for each mill levied.

Each taxing jurisdiction levies mills to properties within its boundaries to meet its budget needs. Property owners pay based on the total mills levied from all applicable jurisdictions.

Property tax statements itemize the specific mills levied, including a description of the government services provided. The number of line items depends on how many initiatives were approved by the voters within the property’s tax jurisdictions, as well as additional levies approved by state legislation.

In the example tax statement, there are 43 line items across six different tax jurisdictions. These line items total 620.970 mills levied.

The mills levied is prominently displayed on tax statements.

a.  All properties within the same tax jurisdiction are subject to the same mill levy

All properties within the same tax jurisdiction are subject to the same mill levy, regardless of property class. 

Example

In our example tax statement, all properties in the tax district are subject to 620.970 mills.

5.  Property Taxes

To calculate property taxes, apply the following formula:

Example

For the example tax statement, the calculation is:

a.  Special Assessments (add-ons)

In addition to regular property taxes, a property tax statement may include special assessments – additional charges imposed by a tax jurisdiction to fund specific public projects and services that directly benefit the property. Projects include street paving and repairs, sewer and water system upgrades, boulevard maintenance, sidewalk installation, and streetlights or other local infrastructure improvements. These are usually flat fees and are listed as line items line under Special Assessments on your property tax bill.

Example

In the example tax statement, there are three special assessments totaling $25.28. The first is the Gallatin County Conversation District Mills, amounting to $4.45.

b.  Total Property Taxes

The total property taxes are the sum of the property taxes owed and any special assessments:

In Montana, property taxes are divided into two equal payments.

c.  One Tax Bill for All Tax Jurisdictions

In Montana, the county is responsible for administering property tax statements on behalf of all applicable tax jurisdictions. This means that property owners receive a single tax bill that includes taxes from various jurisdictions (such as city, county, school district, and other special districts). Once payment is made, the county transfers the funds to the respective tax jurisdictions on the property owner's behalf.

Example

The statement provides a summary of how much taxes are paid to each tax jurisdiction.

This is Part 1 of a Series on Property Taxation in Montana.

Greg Gilpin

Professor

   Department of Agricultural Economics and Economics
   406-994-5628
   gregory.gilpin@montana.edu