With a March 1 deadline looming, data from the Montana Department of Revenue indicates that landlords for as many as three-quarters of the state’s rental housing units haven’t applied for an exemption that would shield their properties from hefty tax increases as the state’s new second-home t ax is fully implemented on this fall’s tax bills. Unless tens of thousands of landlords successfully apply in the coming days, long-term rental properties across the state could be hit with a double-digit increase on tax bills — an expense that could translate to steep rent hikes for tenants. In a Monday email to Montana Free Press, revenue department spokesperson Jason Slead said the state agency is working diligently to get the word out about the March 1 application deadline. “The Montana Department of Revenue is committed to ensuring every eligible property owner benefits from the reforms passed by the Legislature,” Slead wrote. John Sinrud, the president of the Montana Landlords Association, said in a Monday interview with MTFP that he’s hearing from many landlords who are confused by the revenue department’s guidance materials.  Among other issues, Sinrud said some property owners are worried that reporting the business information required by the exemption application could expose them to legal liability if it doesn’t precisely match the income tax forms they file with a different branch of the revenue department. “They don’t want to be brought up on some type of fraudulent charge,” Sinrud said. Landlords can apply for the exemption at homestead.mt.gov, where forms ask for information on annual rental income, annual expenses and monthly rents. Tenants can also check their landlord’s application status via a lookup tool on the revenue department website. The applications to exempt long-term rentals from higher tax rates are required as part of the second-home tax, passed by lawmakers and Gov. Greg Gianforte last year. That legislation sets higher default tax rates on residential properties, but reduces rates for properties that qualify either as owner-occupied principal residences or long-term rentals. Supporters intended to offer tax relief for housing being used as homes for Montana residents, offsetting that relief with higher taxes on second homes and Airbnb-style short-term rentals. In response to inquiries from MTFP, the revenue department said in a Feb. 19 email that it had received applications for long-term rental rate exemptions for about 19,100 properties associated with roughly 31,700 living units. Another 4,000 to 5,000 paper applications were still pending, the department said. In comparison, data from the U.S. Census Bureau estimates that Montana has about 147,000 units of renter-occupied housing. If each of the pending paper applications represents one housing unit, that leaves about 110,000 renter households unaccounted for — nearly three-quarters of the state’s rental stock. The census data doesn’t align precisely with the property designations the state uses for tax purposes, but revenue department officials, who have cited similar census data in the past while assessing the tax system, declined to provide MTFP with an alternate figure for the number of likely eligible rental properties. The state’s tax code hasn’t previously required the department to keep tabs on which residential properties are and aren’t being used as rental housing. Sinrud, with the Montana Landlords Association, also said that the second-home tax law and department application materials don’t line up with some landlords’ specific circumstances, such as when people rent out rooms or housing units on the same property as their primary residence. “There are dozens of different scenarios that this bill didn’t cover,” he said. In contrast to rentals, the new law has automatically qualified most owner-occupied homes for “homestead” treatment after successfully applying for the property tax rebates issued by the state last year. In response to questions from MTFP, the revenue department said that it had granted primary residence exemptions already to about 230,300 properties and had 9,076 more applications pending as of Feb. 19. Primary residences also face a March 1 application deadline. Given the complexity of the state’s property tax system, it isn’t yet clear how tax bills will shift for individual properties that do or don’t qualify for lower rates. A preliminary analysis by the revenue department last year indicated that an average home that isn’t exempted from the second-home tax as a principal residence or rental could see its tax bill rise by 50% between 2025 and 2026. Mara Silvers contributed reporting. The post Many Montana landlords haven’t filed to avoid second-home tax appeared first on Montana Free Press. ...read more read less