Montana Second Home Tax: STR Bills Double, the 28-Day Fix

Missoula's city council passed its fiscal year 2027 budget on Monday, August 17, 2026, on a unanimous vote. It is the first clean look Montana hosts have had at what the state's new second home tax does to a real house in a real municipal budget.

The city's own example runs on a $507,000 home. Owner occupied, the city portion of the bill falls from $1,542 to $1,468. The identical house operated as a short term rental or second home climbs from $1,542 to $3,510, according to the city's own example reported by NBC Montana on August 18, 2026. That is a 128 percent increase for the STR owner in a year when Missoula's overall property tax collections rose 3.8 percent.

The split traces back to Montana's 2025 property tax overhaul, which reached full force with the 2026 bills. Primary residences and qualifying long term rentals now draw tiered homestead rates starting at 0.76 percent, while second homes and short term rentals pay a flat 1.90 percent rate, per the Montana Department of Revenue. Most coverage stops there. The homestead rate is not reserved for owner occupants: a property leased in stretches of at least 28 days, for at least 7 months of the year, qualifies for the same reduced rates. Rental structure has become a tax decision, and enrollment for 2027 is open now, with a hard deadline of March 1, 2027.

Key facts

• Montana's 2026 homestead assessment rates are tiered: 0.76% on the first $378,000 of market value, 0.90% up to $756,000, 1.10% up to $1,511,999, and 1.90% above that. Second homes and short term rentals pay a flat 1.90%, per the Montana Department of Revenue.
• Missoula's FY 2027 budget, passed August 17, 2026, puts a $507,000 home at $1,468 in city taxes as a primary residence and $3,510 as a second home or STR, per NBC Montana. Same house, 2.4 times the bill.
• Homestead rates apply through owner occupancy of at least 7 months per year, or through rental on leases of at least 28 days at a stretch for at least 7 months per year, per Montana Free Press reporting on the Department of Revenue's rules. Short term rental use does not qualify.
• Enrollment for the 2027 reduced rate opened May 4, 2026, and the application deadline is March 1, 2027.
• The Department of Revenue projected 2026 bills would fall about 18% on average for owner occupied homes and about 22% for long term rentals, while non-qualifying properties would rise about 68%, per Montana Free Press.

The assessment math behind the new rates

The 2025 Legislature enacted the overhaul as Senate Bill 542 and House Bill 231, a package built to lower rates on homes Montanans live in and raise them on properties that sit empty or turn over nightly. 2026 is the first full tax year under the new structure.

Montana does not tax market value directly. An assessment rate converts market value into taxable value, and local mill levies are then applied to that taxable value. The intermediate step is where the new law does its work. Homestead properties draw the 2026 assessment rates: 0.76 percent on the first $378,000 of market value, 0.90 percent on the portion up to $756,000, 1.10 percent up to $1,511,999, and 1.90 percent on anything above. Second homes, short term rentals, and vacant residential lots skip the tiers and pay a flat 1.90 percent across the whole value.

Qualifying as a homestead takes one of two paths: the owner occupies the property as a principal residence for at least 7 months of the year, or it is leased in stretches of at least 28 days for at least 7 months of the year. Mixed use inside a single year can still qualify, and the Department of Revenue's FAQ confirms it: the example given is an owner who lives in the home April through December and rents it January through March. Nightly and weekly rental is the one thing that never counts. The DOR names Airbnbs and VRBOs explicitly in the flat 1.90 percent category.

One house, two bills: the Missoula arithmetic

Run Missoula's example through the formula and the city's figures hold. A $507,000 primary residence produces $2,873 of taxable value on its first $378,000 (at 0.76 percent) plus $1,161 on the remaining $129,000 (at 0.90 percent), for a total of $4,034. That is an effective assessment rate of about 0.80 percent. Assessed as an STR at the flat 1.90 percent, the same house carries $9,633 of taxable value.

The ratio tells the story. $9,633 against $4,034 works out to 2.39 times, and Missoula's bills land in precisely that proportion: $3,510 against $1,468. The annual gap is $2,042, and that is the city portion by itself. County, school, and state mills are levied on the same taxable value, so the full-bill spread runs wider than the city's example shows.

None of this is a Missoula policy choice. The council raised overall collections 3.8 percent; the reshuffling between neighbors came out of the state formula, built so residents and long term landlords pay less because second homes and short term rentals pay more.

The 28 day lever

For a vacation rental that books nightly year round, the flat 1.90 percent is a cost of the business model, priced the same way taxes and platform fees are.

Plenty of Montana STRs do not need twelve months of nightly booking to reach their revenue number. Bozeman, Missoula, Whitefish, and Big Sky all carry deep winter demand for furnished monthly housing: traveling nurses, university staff and students, seasonal workers, families between homes. Run the property nightly through the summer peak, sign 28 day or longer leases for the balance of the year, and the homestead test is satisfied, because the threshold is at least 7 months of qualifying leases rather than 12.

The calendar leaves room to spare. Nightly rental June through August accounts for 3 months, which leaves 9 months open for 28 day plus leases against a requirement of 7. The DOR's FAQ example of a cabin rented in 28 day stretches for at least 7 months to tenants who occupy it as a residence is the template. Against the Missoula example house, requalifying is worth $2,042 a year on the city bill alone: real money for a structural change many college town hosts already make for occupancy reasons, a pattern we covered in the mid term rental shift.

Two details favor multi-unit owners. Montana Free Press reports that multi-dwelling properties are assessed unit by unit, so an owner living in the main house while running an Airbnb out of a detached unit keeps homestead treatment on the residence's share of the value and pays 1.90 percent only on the STR portion. The second detail concerns ownership. Owner occupied homestead treatment is limited to individuals, couples, and revocable trusts, but the long term rental path carries no such limit: a property that meets the 28 day lease requirements can qualify regardless of ownership structure, LLCs included.

Do not stretch the facts to claim the rate. False attestation costs three times the tax savings, plus a possible $500 fine and up to six months in jail.

Claiming the rate before March 1, 2027

Applications for the 2027 tax year opened May 4, 2026, with separate tracks for principal residences and long term rentals, filed online through the DOR's SmartFile system or on paper. The deadline is March 1, 2027. Missing it means paying the 1.90 percent rate for another full year.

The filing gap is the quieter story. As of February 24, 2026, days ahead of the 2026 deadline, roughly 19,100 rental properties covering about 31,700 units had been approved for the long term rental rate, with 4,000 to 5,000 paper applications still pending, against roughly 147,000 renter occupied units statewide. A large share of landlords who qualified had simply not filed. Converting to a mid term structure, or already running one, earns nothing on its own. The discount has to be claimed.

For a host weighing the switch, the work is short: price a 28 day plus winter lease against realistic off season nightly revenue net of turnover costs, confirm at least 7 months of qualifying lease stretches, keep signed leases as documentation, and file before March 1. Where the winter math is close, a tax swing above $2,000 is often the tiebreaker.

What comes next, in Montana and elsewhere

Montana is not acting alone. It is the clearest example yet of a 2026 pattern: taxing authorities splitting property tax treatment by use, with short term rentals landing on the expensive side of the line. New York City began mailing surcharge notices to non-primary-residence owners this summer, with an exemption filing due September 18, and Rhode Island's new tax on non-owner-occupied second homes turns on a 183 day occupancy test that actively rented properties can pass.

Each regime turns on an occupancy test, and each test has a host-side answer. Month plus leases count toward Montana's 7 month test. Rental days count toward Rhode Island's 183. A full time tenant exempts a NYC property. Treat the test as a design constraint, not a verdict.

If a hybrid calendar is where a host lands, the operational piece is filling those 28 day winter stays. OTA search is built around short stays, so monthly winter leases mostly get filled through channels the host owns: past guest email lists, local employer and university housing offices, a direct booking site. That is the model Haven is built for, where hosts keep the guest relationship and the guest data, so a summer guest can become a winter referral without a booking commission on either side.

Two things are worth watching: whether Montana's 2027 Legislature adjusts the tiers after a year of bills, and whether other Mountain West states copy the 28 day lease definition when they take up second home taxes. When the definition moves, the planning moves with it.

FAQ

Do Airbnbs pay higher property taxes in Montana now?

Yes. Beginning with the 2026 tax year, short term rentals and second homes are assessed at a flat 1.90 percent of market value, while primary residences and qualifying long term rentals get tiered rates starting at 0.76 percent, per the Montana Department of Revenue. On Missoula's example $507,000 home, that works out to $3,510 versus $1,468 in city taxes for 2027.

How do I get Montana's homestead rate if I rent my property out?

Lease it in stretches of at least 28 days, for at least 7 months of the year, to tenants who occupy it as a residence, then apply with the Department of Revenue by March 1, 2027 for the 2027 tax year. Nightly and weekly rental does not count toward the 7 months.

Can I run my Montana property as an Airbnb part of the year and still get the lower rate?

Yes, if the rest of the calendar qualifies. Renting nightly for the 3 summer months and leasing in 28 day plus stretches for at least 7 of the remaining 9 months meets the test. The Department of Revenue's own examples allow mixed use within a year.

Does an LLC owned rental qualify for Montana's reduced rate?

On the long term rental path, yes. Montana Free Press reports that any property meeting the lease requirements can qualify regardless of ownership structure. The owner occupied path is narrower, covering individuals, couples, and revocable trusts only.

What happens if I claim the homestead rate but do not qualify?

A fraudulent claim carries a penalty of three times the amount saved, plus a possible $500 fine and up to six months in jail. Keep signed leases on file and claim only the calendars you actually ran.