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Montana · iso amt

ISO exercises and AMT in Montana

Montana does not run a separate state AMT. Federal AMT still applies on your ISO bargain element; we walk through the interaction.

What Montana residents actually pay

Montana taxes ordinary income at a top marginal rate of 5.9%. RSU settlement value, NSO exercise spread, and ESPP discount income all count as ordinary wages for this purpose and flow through the state's normal brackets.

Partial capital-gains credit.

Federal AMT on the bargain element

Exercising ISOs and holding the shares creates AMT "preference income" equal to the spread between fair market value at exercise and your strike price. That's the bargain element. It doesn't show up on a W-2, and many people discover it only when their CPA calculates AMT in April.

Frequently asked

Does Montana tax RSU income the same as wages?
Yes. Montana treats RSU ordinary income as wages, taxable at the state's top marginal rate of 5.9%. Supplemental-wage federal withholding (22%, or 37% above $1M YTD) does not adjust for state withholding, so you often owe extra at filing.
What happens if I exercise ISOs while living in Montana?
Montana does not run a separate state AMT, so only federal AMT applies. You still need to model the bargain element carefully if you plan a cashless exercise-and-sell.
I moved to Montana from another state. Who taxes my vesting RSUs?
Most high-tax states (CA, NY, MA) source RSU ordinary income to workdays between grant and vest. If your grant pre-dates your Montana move, expect the old state to tax the portion of each tranche attributable to workdays earned there. Montana taxes the remainder.
Can I reduce Montana taxes by timing my RSU sales?
Montana gives preferential treatment to long-term capital gains. Holding RSU shares 12+ months past vest can produce both federal and state savings. Weigh concentration risk before using this as a reason to hold.

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