Ask a buyer which side of Big Sky will feel Montana's new second-home tax hardest in 2026, and most will pick the Madison County side, where values are higher and full-time residents are fewer. The state's own projections point the other way.
When the Montana Department of Revenue modeled the 2025 property tax overhaul, the county averages it produced split Big Sky in two. In Gallatin County, second-home bills were projected to climb modestly in 2025 and then jump in 2026. In Madison County, the big increase was projected for 2025, followed by a small decline in 2026. With 2026 bills arriving within weeks, that split matters to anyone weighing a property on either side of the county line.
The projection, side by side
Montana Free Press published the Department of Revenue's county-level projections in May 2025. These are the figures for the two counties that share Big Sky, comparing 2024 bills to the projected 2026 bills:
| Property type | Gallatin 2025 | Gallatin 2026 | Gallatin 2024 to 2026 | Madison 2025 | Madison 2026 | Madison 2024 to 2026 |
|---|---|---|---|---|---|---|
| Second homes and other non-homestead residential | up 13% | up 51% | up 71% | up 56% | down 8% | up 44% |
| Owner-occupied homes with homestead | down 12% | down 1% | down 12% | down 7% | down 10% | down 17% |
| Long-term rentals with homestead | up 13% | down 34% | down 26% | up 56% | down 55% | down 29% |
| Share of county tax base held by second homes | 15.4% | 72.2% |
The bottom row explains the rest of the table. In Gallatin County, second homes made up about 15% of the tax base. In Madison County, they made up 72.2%, while owner-occupied homestead property was just 4.2%.
These are averages and forecasts, not bills. Montana Free Press noted at the time that actual bills for individual properties would likely vary widely, depending on local tax bases and how the department values each property relative to its neighbors.
Why a tax aimed at second homes eases off where second homes dominate
Montana's property tax mostly works by shifting burden among property types rather than cutting what local governments collect. Montana Free Press describes floating local levies that hold local revenue steady and move the load from one class of property to another. In a county where second homes are a minority, raising their rate pushes a real share of the bill off homesteads and onto them. In Gallatin County, that shows up as the projected 51% increase for 2026.
In Madison County, second homes are most of the base, so there is far less homestead property to take the load off. No source spells out a Madison-specific explanation for the projected 8% decline in 2026, but the composition of the tax base is the most reasonable reading of it. Second-home owners there absorbed their big projected increase under the 2025 interim rates, and the 2026 structure has little room left to push it further.
The Department of Revenue said as much when its director, Brendan Beatty, held a property tax forum in Big Sky in August 2025. Explore Big Sky reported his framing of where the money now comes from:
"The gold mines are gone. The places like Big Sky are the gold mine," Beatty said. "I don't want to kill it, this is a huge revenue generator for the state."
He described the law as "designed to encourage residency… and it was designed to encourage long-term rentals."
At the same forum, local data showed how far Big Sky values had moved. The median property value on the Gallatin side went from roughly $500,000 in 2021 to $1.5 million in 2025. On the Madison side, it went from $1.2 million to $4 million over the same period. Even so, nearly a third of Big Sky's roughly 7,500 properties across both counties saw their taxable value decline after 2023.
What the homestead rate is worth at Big Sky prices
The homestead rates are tiered, and Big Sky prices sit mostly in the top tiers. For tax year 2026, the Department of Revenue applies these rates to each slice of a qualifying primary home's value:
- 0.76% on the first $378,000
- 0.90% from $378,001 to $756,000
- 1.10% from $756,001 to $1,512,000
- 1.90% above $1,512,000
Second homes, short-term rentals and vacant residential lots pay a flat 1.90% on their full value. These rates produce taxable value. The bill is that taxable value multiplied by the local mill levy, plus any special assessments. Running the published rates against the two Big Sky medians from the forum gives this comparison:
| Market value | Taxable value as a homestead | Taxable value as a second home | Second-home premium |
|---|---|---|---|
| $1.5 million, the 2025 Gallatin-side median | about $14,460 | $28,500 | about 97% higher |
| $4 million, the 2025 Madison-side median | about $61,860 | $76,000 | about 23% higher |
The homestead discount comes from the lower tiers, and those stop at $1.512 million. Above that, every dollar is taxed at 1.90% whether the owner lives there or not. At Gallatin-side prices, homestead status roughly halves taxable value. At Madison-side prices, it trims it. For a buyer deciding whether a Big Sky property will be a primary residence, the value of that decision shrinks as the price rises.
The friction that surfaces at closing, not at the bill
The rate is set by how the property is used and who owns it, and both are often decided at the closing table, months before a tax bill shows up.
- Ownership structure. According to the Department of Revenue, an individual, a married couple or a qualifying grantor revocable trust can claim the owner-occupied homestead rate. An LLC or an irrevocable trust cannot. At the Big Sky forum, attendees raised LLC and trust ownership as a complication, and Beatty said it was still unclear how the department would enforce the spirit of the law.
- The seven-month test. A homestead has to be the owner's principal residence for at least seven months a year, taxes have to be current, and an owner can claim only one homestead.
- Long-term rental rules. According to the Department of Revenue, to qualify, the property has to be rented for periods of at least 28 days for at least seven months a year, to tenants who live there. LLCs can qualify under this classification. The 2026 application asked for prior-year rental income, expenses and monthly rents.
- Enrollment timing. The Department of Revenue pushed the 2026 deadline from March 1 to March 20 because of portal problems. Enrollment for 2026 is now closed, and the portal is taking 2027 applications. Owners who received the 2025 rebate and stayed in the same primary home were enrolled automatically. A move or a change in ownership requires a new enrollment. That makes a Big Sky purchase that closed after March a property that will likely be billed at the non-homestead rate for 2026.
- A narrow fallback. Montana Free Press reported that a homeowner who missed enrollment may be able to get the lower rate through a successful appeal after the bill arrives. That fallback does not apply to landlords.
The other line on a Gallatin-side bill
On the Gallatin side, one more change will show up on this year's bills. Gallatin County double-counted voter-approved mills for the Big Sky Fire District for four years starting in fiscal year 2022, over-collecting $8.3 million. That money has been spent and cannot legally be refunded. Madison County's calculations were correct. Explore Big Sky reported in February 2026 that fire tax assessments will drop by up to 50% this year, while the Big Sky Fire Department faces a $2.3 million budget gap from the previous year. Gallatin County Commissioner Zach Brown and Fire Chief Dustin Tetrault presented the details at The Wilson. For a Gallatin-side second home, a lower fire assessment will partly offset the state's higher rate on the same bill.
What is still unsettled
Several pieces of this are still moving. A lawsuit challenging SB 542 on procedural constitutional grounds is in Gallatin County District Court. The Montana Supreme Court declined on March 31, 2026, to take the case directly. As of the Legislature's tracker update on May 30, 2026, the law was in effect and briefing was ongoing. The Revenue Interim Committee's work plan schedules a property tax rate recommendation for November 16, 2026. No property tax measure appeared on the Secretary of State's list of initiatives qualified for the 2026 ballot as of its August 17, 2026 update.
Quick answers
When do 2026 bills arrive? The Department of Revenue says county treasurers usually mail real property bills in late October. The first half is due November 30, or 30 days after the notice postmark if that is later. The second half is due May 31.
Did 2025 bills match the projections? Fall 2025 bills ran on interim rates. The Department of Revenue's analysis compared them with what the old law would have produced, not with 2024 bills. By that measure, it estimated that a median $685,000 Gallatin County home saved $1,020, and that residential properties valued above about $1.7 million generally paid more.
Do homes on agricultural land follow the same rules? No. According to the Department of Revenue, a second-home dwelling on qualifying agricultural land is classified at 1.35% rather than 1.90%.
This post explains how the law works. It is not tax advice. For your own property, talk to a tax professional before deciding on ownership structure or use.
If you are weighing a property on either side of the county line, or deciding how to hold title before you close, Michelle Horning can go through what the 2026 rules mean for that specific address alongside your tax advisor. Schedule a free consultation before the November 30 payment date gets close.
