Owners of second homes, short-term rentals could see Missoula city taxes double

"Their taxable values increased significantly, and many of those folks (with second homes) could see their property tax double because of changes (made by) the Legislature," city Digital Engagement Administrator Jessica Miller said during a council meeting on Wednesday. 

The shift follows changes made by the Montana State Legislature that aimed to lower the tax burden on residential property by creating a homestead exemption for owner-occupied homes and the owners of long-term rentals.

Property owners needed to apply for the exemption through the Montana Department of Revenue. 

Lee Montana previously reported the number of approved exemptions lagged behind initial estimates of eligible rental properties, leading some to worry many landlords will see higher property taxes and pass on the expense to renters.

There are approximately 400 registered short-term rentals registered with the city, according to Maggie McCarthy, the city's permit and business licensing manager. 

Of that, 218 of the properties are classified as "tourist homes," meaning the home is not owner or manager occupied, and would likely be included in the higher state tax rate.

The City of Missoula does not have the number of properties considered second homes, according to communications specialist Ashley Warren.

Miller showed data that a $507,000 median priced second home or a short-term rental in Missoula County, which are taxed at the same rate, will see its city taxes increase from $1,542 to $3,510, or about 127%. 

Meanwhile, a median-priced, owner-occupied home is projected to see a $72 decrease in property taxes despite the city increasing its property tax revenues by 3.8%.

An owner-occupied median-priced home is set to see its taxes shift from $1,542 to $1,468, a 4.9% decrease. A larger owner-occupied home valued at $750,000 will see a larger decrease of $252, according to city data.

"Most primary homes saw their taxable value decrease," Miller said. 

Property taxes on commercial buildings spiked in 2025, but in 2026 new tax rates will lower property taxes for most properties worth less than $4 million, Miller said.

Dale Bickell, the city's chief administrative officer, said at the meeting that local and state governments have increasingly relied on residential property taxes to fund operations.

Other revenue sources like lumber mills and industrial operations have declined in the state over the last 20 years. Bickell cited data showing residential property taxes made up 42.9% of revenue in 1999, and now sit at 64.8% in 2026. 

"Our property tax system was established in a time where there was a reliance on asset-based businesses like natural resources," Bickell said. 

He said the state Legislature has recently been shifting the tax burden between residential and commercial properties. Now, Bickell said there is an additional shift between primary and secondary homes. 

"Owners of second homes, they are going to pay more, quite a bit more," Bickell said.  

The city's taxes are one portion of a property owner's tax bill. Missoula County, local schools, the Missoula Urban Transportation District, and the state of Montana also levy their own taxes. 

The City of Missoula fiscal year 2027 budget is set for final adoption on Monday. Aug. 3. The Missoula County commissioners are set to approve the county's budget on Thursday, Sept. 3.