Fewer Montana landlords claiming property tax exemption than expected, state says

As the deadline to apply for preferential property tax rates fast approaches, the number of applications from landlords of long-term rentals is lagging far behind previous state estimates.

The second phase of new property tax reforms are going into effect in 2026, and the key part of those laws are lower tax rates for primary residents and long-term rental landlords, and higher rates for short-term rentals like Airbnbs and second homes. But to qualify for those tax breaks homeowners and landlords must apply and prove eligibility with the Montana Department of Revenue. The deadline for applications is March 1, but since that is a Sunday, the Revenue Department said they would accept applications until March 2.

Bryce Kaatz, Revenue Department Property Assessment Bureau Chief, told a legislative committee on Monday that the department has so far received 21,000 long-term online rental applications for the preferential tax rate. A previous estimate found in a document on the fiscal impact of these new laws put that number of eligible rentals at 54,300.

Of the 19,111 applications that the department has processed, spokesperson Jason Slead said that accounts for 31,671 living units. The state of Montana has roughly 147,000 units of renter-occupied housing, the Montana Free Press reported.

This lag matters because if a long-term rental does not qualify, it will be subject to a 1.9% tax rate like second homes instead of the lower 1.1%. For long-term rentals that qualify, the tax bills are projected to go down in 2026 by 27% statewide, according to previous analysis, but if the landlords don’t apply, the bills could rise instead. In past years, as property taxes rose, many landlords across Montana also increased rents to account for their higher tax bills.

Kaatz also emphasized that the previous estimate on long-term rentals was a “shot in the dark” based on census data, so it's not necessarily surprising that applications are lagging far behind. He also reminded Montanans that there are still six days left in the application window, and there could be a windfall at the last minute.

“If you’re a renter you should be reaching out to your landlord and saying: ‘Did you apply?’,” Heather O’Loughlin, executive director of the Montana Budget and Policy Center, said on Monday.

John Sinrud, president of the Montana Landlord’s Association, said that he has fielded hundreds of calls from confused landlords and spent hundreds of hours helping his members with this issue. He said many landlords have expressed concern over a section of the application that states the property owners could be “liable for any mistakes or incorrect applications, and there are significant penalties for false or fraudulent applications.”

“People take that to heart because they fear their government,” he said.

An eligible long-term rental is a residence leased to tenants for periods of 28 days or more for at least 7 months a year. Sinrud pointed out that some property managers might be remodeling or doing repairs following a tenant who “trashed” the unit, which could make the residence ineligible.

“So even though it is a long-term rental you're going to have to pay as a second home,” he said.

Proponents of these bills said during the legislative session that the lower tax rate for multi-family rentals was meant to drive down rental costs after many landlords have raised rents following property tax increases over the last few years. Though many Democrats and some lobbyists said that approach likely would not play out, and the Legislature should instead pass targeted relief for renters. A bill meant to accomplish that by giving renters a tax credit based on their income level died in the Senate after it passed the House.

During the 2025 session, some opponents raised the concern that the barrier of an application — as opposed to the state automatically enrolling qualifying residences — could leave some landlords and primary residents behind.

The Montana Department of Revenue has granted roughly 230,000 applications for primary residents, a number that is on pace with previous estimates. That preferential tax rate is often referred to as the “homestead exemption,” and most of those properties were auto-enrolled into the reduced rate as they previously qualified for the $400 rebate that was handed out in 2025.

Many of the concepts in these new laws are born out of years of work and fierce debate at the Legislature. Gov. Greg Gianforte convened a property tax task force after residential property taxes skyrocketed during the 2023 tax cycle. That task force recommended the homestead and long-term rental exemptions that ultimately made it into law.

Landlords and homeowners can visit homestead.mt.gov to apply online, and renters are also able to check the status of their landlords application at the same web address.

"Any Montanan who owns a rental property and rents to tenants for 7 months or longer should visit homestead.mt.gov to see if they qualify," Slead said.