The Ultimate Guide to Montana Real Estate Taxes

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By Clever Real Estate Updated March 3, 2023


Buying or selling your Montana home is a reason to celebrate. But, will you be hit with a hefty tax bill? Believe it or not, you might have to pay taxes no matter if you’re a buyer or seller. Don’t know what we’re talking about? Read our article for your ultimate guide to Montana real estate taxes.

The Ultimate Guide to Montana Real Estate Taxes

Do you occupy or own a home in Montana? Either way, you must learn to navigate and pay property taxes. Your responsibility doesn’t stop there.

Believe it or not, you may have to pay taxes when you sell your home. So it doesn’t matter if you are a home buyer or seller, you must understand Montana real estate taxes before getting your feet wet. After all, you don’t want to end up with a hefty bill due to unpaid taxes or late payments.

Don’t know where to start? We’ll tell you all there’s to know about real estate taxes in Montana no matter if you’re a homeowner, seller or buyer. Read on for your ultimate guide to hit the nail on its head when it comes to Montana real estate taxes.

Will You Have to Pay Taxes When You Sell a Home in Montana?

You might be celebrating getting the best offer for your home but, will you have to pay taxes on your homeselling profits? At the state level, you file a Montana tax return to report your taxable gain. Your taxes will depend on the applicable income-based tax bracket.

Your state tax rate may range between 1% to 6.9%. While you must report your homeselling profits on your federal tax returns, you may not have to pay taxes on your earnings. If you lived in your home for two to five years, you won’t have to pay taxes on profits up to $250,000 or up to $500,000 if you file jointly.

When your homeselling profits exceed these tax-free limits, you must report the excess as a capital gain in your returns. The current capital gains tax rate for real estate property is 25% of your excess profits but, keep in mind that you may not be eligible for the tax-free limits in certain cases. Some examples are if the property sold wasn’t your primary residence, you didn’t live in the house for at least two years, among other exceptions.

How Much Are Real Estate Transfer Taxes in Montana (and Who Pays Them)?

Typically, most states charge a transfer tax on any transfer of real estate property. Yet, the state of Montana is an exemption to this rule. This state doesn’t charge a percentage of your sale price for transferring your property to a buyer.

But, you should keep in mind that your home sale and profits may be subject to other local taxes. We recommend you discuss your potential property tax liability with a local real estate agent or tax professional. An experienced agent or tax expert can tell you more about Montana’s applicable tax rates and what to expect when it comes to your tax liability.

How to Calculate Property Taxes in Montana

Calculating your Montana property taxes isn’t as easy as multiplying your home value by the applicable tax rate. It all starts with understanding your state’s assessment ratio. This ratio is the percentage determined by the county appraisal and the home market value.

In Montana, the assessment ratio rate is 100% of the property value. But, keep in mind that the assessed market value is usually less than your home market value for resale.

Property assessment practices may vary on a county basis. Montana conducts all their residential property valuations every two years. The current property tax rate in this state is 0.85% of the property’s assessed value.

Besides the applicable tax rate, you must consider any applicable millage rates. These tax rates are taxes imposed per thousand of assessed value. Millage rates vary based on your location.

An example of calculating your Montana property taxes is owning a property with an assessed value of $250,000. You would need to multiply this value by the current 0.85% property tax rate to obtain your current taxable value. In this case, the taxable value of the property is $2,125.

If you’re responsible for millage rates, you must multiply your taxable value by the applicable rate. For this example, let’s apply a millage rate of 0.857. The estimated taxes due on your property would be about $1,821.13.

Keep in mind that your property taxes may vary on a county basis. If the same property was located in Stillwater County you would pay a property tax rate of 0.716%.

The taxable value for this house would be $1,790 instead of $2,125. If the same millage rate was applied, you would owe about $1,534.03 in estimated taxes. We recommend you discuss your property tax liability in your preferred market with your real estate agent to learn all about your homeownership costs.

Tax Breaks for Montana Home Buyers & Sellers

While paying property taxes might’ve you on edge about buying or selling your property, you should keep in mind that you may be eligible for tax credits or deductions. Don’t know where to start? Here are the top tax breaks you should consider as a Montana home buyer or seller.

Tax Credits for Buyers

Montana home buyers can take advantage of the following tax credits to lower their homeownership costs.

  1. Mortgage Interest Deduction: Believe it or not, you may get something out of making your mortgage payments. Montana allows you to deduct your interest amount and points you paid on your home loan. You must report the same amount from your IRS Form 1098.
  2. First-Time Home Buyer Savings Account: If you’re planning to buy a property in Montana, you may consider opening this savings account. You may deposit every year up to $3,000 or $6,000 if filing jointly. Your income and interest are tax-exempt.
  3. Real Estate Taxes: The state of Montana allows you to deduct your real estate property taxes in your returns. Keep in mind that you must report the same amount from your federal return.

Tax Breaks and Write-Offs for Sellers

As a Montana homeseller, you might only be worrying about the capital gains due on your homeselling profits. But, you may be forgetting these tax breaks and write-offs that can lower your tax liability.

  1. Mortgage Interest or Point Deductions: Even when you sell your home, you can deduct all your paid mortgage interest and mortgage points. Remember to deduct the same amount on your state and federal taxes.
  2. Home Repairs: If you need to do some repairs to your home before selling it, you may be able to deduct it in your taxes. Keep in mind that these repairs must be done 90 days before closing.
  3. Home Selling Costs: Believe it or not, you can deduct the costs of selling your home. You may include costs such as attorney fees, home listing, title company costs, realtor fees, among others.

Your tax liability as a buyer or seller may vary on a location basis. We recommend that you consult a certified tax professional to learn more about your tax liability, credits, and breaks. Getting the right advice can help you minimize your risk of tax exposure in your home buying and selling journey.

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