Montana Real Estate Transfer Taxes: An In-Depth Guide

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Clever Real Estate

Updated 

May 2nd, 2019

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Navigating Montana real estate transfer taxes is different than any other state. While things may seem simple, it's important to have an experienced local agent to handle everything.

When a piece of property is exchanged between two parties, it's typical to have to pay transfer taxes as a fee to the municipal government for transferring the title of property. Different states have different rates based on property values in the region. They can vary wildly from a fraction of a percent to 3% of your total closing price of a property.

During negotiations between agents, it's hashed out who is going to end up paying the fee. It's customary in some states for one party to pay over the other, but there's no set rule. Rather than trying to navigate it alone, hiring an experienced local agent ensures you have someone in your corner who understands how to handle Montana real estate transfer taxes.

Here is everything you need to know this tax in your Montana county.

Who Pays Transfer Taxes in Montana: the Buyer or the Seller?

In most states, the buyer and seller split the transfer taxes as part of the agreement during closing. However, it's usually the seller who is responsible for doing the actual filing. It doesn't matter in most states where the money originates from, so long as they get it from the seller.

In Montana, you need to file a Realty Transfer Certificate when you file your deed. The County Clerk and Recorder's office is going to need to get both the forms at the same time.

You'll need to get the last four digits of the social security number of both buyer and seller. If the property is being bought or sold by a corporation, the Federal Employment ID Number is required. If foreign nationals are a part of the transaction, their Tax ID number will be used.

Montana is one of five U.S. states that requires no monetary fee for transfer taxes, so you're in luck when closing on a property in the state.

While bills have been introduced several times in the last few decades to propose changes to the tax law, none have passed.

How Much Are Transfer Taxes in Montana?

As stated above, Montana buyers and sellers are in luck as there are no transfer taxes collected in Big Sky Country. This is great news as with average home prices just under $250,000, that nearly 2% collected in some states and counties could lead to a hefty fee at closing.

When transfer taxes are paid, it can cut into the profit made by the seller and in some cases be added to the costs by the buyer in order to appease the seller of a hot property.

Can You Deduct Transfer Taxes?

Transfer taxes, when levied against a seller, can't be deducted on taxes. They're considered to be part of the cost basis of the property, not apart from it.

However, in states where transfer tax is paid, there are ways to deduct the cost of the tax at the end of the year. When selling a home that's worth more than $250,000, the gains that are made by the seller over that number need to be claimed as capital gains. However, the transfer tax is allowed to be deducted from that number before tax is calculated.

That means when selling a home for $260,000, if the seller paid $10,000 in transfer taxes, they'll pay no capital gains tax. While this is a nice cushion for some taxpayers, it's required that sellers keep immaculate records. When buying or selling any large property, it's important to have an agent keeping records.

Other Considerations

While the transfer taxes that are levied against buyers and sellers can be a burden when it comes time to close on a sale, there are lots of other things that come up during closing. Between inspections, legal fees, and other transaction costs, you could still pay 3% of the property value at closing. That $250,000 home could cost $7,500 in closing costs in most states.

Because Montana doesn't put such a tax burden on buyers and sellers, closing costs are much closer to 1%. However, you'll still have to pay commission fees to the buyer and listing agents, which end up bringing an extra 6% in costs.

Make sure you split the costs between the buyer and seller so that one party doesn't take on the whole burden on their own.

Your best bet as a buyer or a seller is to hire an experienced local agent who can walk you through all the steps of filing disclosures, listing your property, and having a smooth closing. The maze of real estate transactions shouldn't be navigated alone, so contact us today for a Clever Partner Agent from right in your neck of the woods.

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