Airbnb vs. Long-Term Rental in Montana: The 2026 Math (Taxes Changed Everything)
Montana's 2026 tax overhaul doubled the property tax on short-term rentals. Add local permit requirements and lodging taxes, and the math has fundamentally changed. Here's the real comparison.
The 2026 Tax Change Flipped the Script
Before 2026, running an Airbnb in Montana had a clear tax advantage — same property tax rate as any other residential property, plus high nightly rates in tourist markets.
That changed dramatically. Montana's 2026 property tax overhaul created a two-tier system:
| Property Type | Tax Rate |
|---|---|
| Primary residence / Long-term rental (28+ day leases) | Tiered: 0.76%–1.90% |
| Short-term rental / Second home / Vacant lot | Flat 1.90% |
On a $500,000 property, that's the difference between ~$3,980/year (long-term) and $9,500/year (STR). That $5,520 annual gap comes straight out of your Airbnb profits.
This alone doesn't kill the STR model — but it makes the comparison much closer than it used to be.
The Full Comparison: Real Numbers
Let's compare a $450,000 property in Bozeman — Montana's strongest STR market:
Short-Term Rental Scenario
| Item | Annual Amount |
|---|---|
| Gross revenue (75% occupancy, $200/night avg) | $54,750 |
| Property tax (1.90% flat) | -$8,550 |
| Lodging tax (7–10%) | -$4,380 |
| Property management (25–35% of revenue) | -$15,313 |
| Cleaning/turnover costs | -$5,200 |
| Furnishing depreciation | -$3,000 |
| Insurance (higher for STR) | -$2,400 |
| Utilities (you pay them) | -$4,800 |
| Maintenance/repairs | -$3,600 |
| Permit/license fees | -$500 |
| Net Operating Income | $7,007 |
Long-Term Rental Scenario
| Item | Annual Amount |
|---|---|
| Gross revenue ($2,100/month × 12) | $25,200 |
| Property tax (tiered rate) | -$3,555 |
| Lodging tax | $0 |
| Property management (9%) | -$2,268 |
| Cleaning/turnover costs (once/year) | -$400 |
| Furnishing | $0 (unfurnished) |
| Insurance | -$1,800 |
| Utilities (tenant pays) | $0 |
| Maintenance/repairs | -$2,500 |
| Vacancy (5%, ~2.5 weeks) | -$1,260 |
| Net Operating Income | $13,417 |
The long-term rental nets $6,410 more per year — with far less work, far less risk, and far fewer headaches.
Bottom Line: $450K Bozeman Property
- $54,750 gross revenue
- $47,743 total expenses
- $7,007 net income
- 75% occupancy needed
- High management (25-35%)
- You pay all utilities
- Permit + lodging tax required
- $25,200 gross revenue
- $11,783 total expenses
- $13,417 net income
- 95% occupancy typical
- Low management (9%)
- Tenant pays utilities
- No special permits needed
But Wait — Doesn't Airbnb Earn More Revenue?
Gross revenue, yes. The STR earns $54,750 vs. $25,200 for the LTR. But look at what eats that revenue:
- Property tax: $5,000 more
- Management fees: $13,000 more (because STR management takes 25–35%, not 9%)
- Utilities: $4,800 more (you pay them, not the tenant)
- Cleaning: $4,800 more
- Lodging tax: $4,380 more
Higher revenue doesn't mean higher profit when your costs scale with turnover.
Montana STR Regulations by City
Beyond taxes, cities are adding friction through permits and restrictions:
| City | Requirements |
|---|---|
| Bozeman | STR permit required, permit caps in residential zones, different rules by zone |
| Missoula | Tourist home permit, STR limited to host's primary residence in residential zones |
| Whitefish | Registration required, cap on total number of STR permits |
| Big Sky | Resort tax applies, zoning-specific requirements |
| Flathead County | Varies by district, some require conditional use permits |
Non-compliance fines can reach $26,000 per violation in some jurisdictions.
Montana Supreme Court ruling (September 2025): Residential covenants prohibiting commercial activity apply to short-term rentals. If your HOA or neighborhood covenants restrict commercial use, your Airbnb may be illegal — regardless of city permits.
Source: Awning — Montana STR Regulations, STR Profit Map
When STR Still Makes Sense in Montana
The numbers above don't mean Airbnb is always worse. STR wins in specific scenarios:
1. High-demand tourist locations with premium nightly rates — Big Sky ski season, Glacier National Park corridor, Yellowstone gateway towns where nightly rates exceed $300
2. Properties you use personally part of the year — You use it 3 months, rent it 9 months. The STR model lets you block personal dates.
3. Unique properties — Lakefront cabins, mountain A-frames, historic properties that command premium rates a long-term tenant would never pay
4. You manage it yourself and live nearby — Eliminating the 25–35% management fee dramatically changes the math
When Long-Term Rental Wins
1. Standard residential properties — A 3-bed house in a Billings subdivision doesn't command Airbnb premium rates
2. You live out of state — Remote STR management is expensive and stressful. LTR management is simpler.
3. You want predictable income — Monthly rent arrives like clockwork. Airbnb income fluctuates seasonally.
4. You want to sleep at night — No guest complaints, no bad reviews, no turnover drama, no Saturday night noise calls from neighbors
5. You want the tax advantage — The 2026 tiered rate saves $5,000+ annually on properties under $756K
The Hybrid Approach
Some Montana landlords are doing both:
- Long-term lease for 7+ months (qualifies for tiered tax rate)
- Furnished short-term rental during peak summer/ski months
- This only works if your lease allows it and local regulations permit it
Consult a tax professional before attempting this — the 2026 rules require the property to be rented as a primary residence for 7+ months to qualify for tiered rates.
Related Reading
- Montana Property Tax: 2026 Rates & Tiers — Deep dive on the tax math
- 5 Best Montana Cities for Rental Investment — Where each strategy works best
- Montana Landlord Insurance Guide — STR insurance costs more (and here's why)