Minnesota taxes the two deeds in an intermediary exchange differently.

Minnesota's deed tax has a rule written for 1031 exchanges that use a qualified intermediary: the deed from you to the intermediary is taxed on the value of the real property, and the deed from the intermediary to your buyer is taxed on the intermediary's fee. The tax is 0.33% of net consideration, due when each taxable deed is presented for recording, so the closing agent needs to know the intermediary is involved before the deeds are drafted.

onezero3one acts as qualified intermediary for exchanges of Minnesota property, subject to a review of each file before an exchange agreement is signed. We work with your closing agent and tax advisor; we do not give tax or legal advice.

What is specific to this state

The federal rules in IRC §1031 decide whether an exchange qualifies. The items below are state requirements that sit alongside them at closing or on the return. Each links to the official source it was checked against; confirm the current version with your closing agent and tax advisor before relying on it.

State items for an exchange (researched September 30, 2026)

Issue	What applies	Usually handled by	Source
Deed tax with a qualified intermediary	Where property goes to a qualified intermediary before the buyer, the deed to the intermediary is taxed on the value of the real property conveyed and the deed from the intermediary to the buyer is taxed on the intermediary's fee. Deferred exchanges using a qualified intermediary.	Closing agent, when the deeds are presented for recording.	Minnesota Department of Revenue, Deed Tax Real Property Exchange Checked September 30, 2026
Direct exchange of parcels	A two-party exchange is treated as two separate transactions; each party, as grantor, pays the tax on its own deed, on the fair market value of the real property given plus any cash consideration. Direct two-party exchanges.	Each grantor, through the closing agent.	Minnesota Department of Revenue, Deed Tax Real Property Exchange Checked September 30, 2026
Deed tax rate and due date	Minnesota deed tax is 0.0033 of net consideration when consideration exceeds $3,000 (plus 0.0001 ERF tax in Hennepin and Ramsey), due when the deed is presented for recording. All taxable Minnesota deeds.	Closing agent or recording party.	Minn. Stat. 287.21 subd. 1; Minnesota DOR, Deed Tax Rate Checked September 30, 2026
Nonresident gain on Minnesota property	Nonresidents are taxed on capital gains from tangible property located in Minnesota; for nonresidents in business, gains from like-kind exchanges are apportionable to Minnesota in the year recognized. Nonresident sellers.	Seller, with tax advisor.	Minnesota DOR, How Minnesota Taxes Nonresident Income Checked September 30, 2026

The deed tax rule for intermediary exchanges

Minnesota Statutes § 287.21 imposes a deed tax on each deed by which Minnesota real property is conveyed. When the consideration, less any lien that stays on the property, is more than $3,000, the tax is 0.0033 of the net consideration. In Hennepin and Ramsey counties an additional Environmental Response Fund tax of 0.0001 applies. The tax is due when the deed is presented for recording.

The Department of Revenue's page on real property exchanges says that when property goes to a qualified intermediary before it goes to the buyer, two interpretations apply:

• the deed transferring the property to the intermediary is taxed on the value of the real property being conveyed; and
• the deed transferring the property from the intermediary to the buyer is taxed on the fee charged by the intermediary.

Because the consideration on the second deed is the intermediary's fee and not the sale price, the closing agent should be told about the intermediary's role before preparing the deed tax documentation. Ask the closing agent how the intermediary's fee is to be shown for that deed.

Direct exchanges are different

For a plain two-party trade of one parcel for another, the Department says an exchange has historically been handled as two separate transactions. Each party, acting as a grantor, conveys with a deed and is responsible for the tax on its own document. If only property changes hands, the tax is based on the fair market value of the real property given; if cash is added, it is the fair market value of the property given plus the cash.

Nonresident sellers and income tax

Minnesota taxes a nonresident's gain on tangible property located in Minnesota. For nonresidents engaged in business activity, the Department states that gains from like-kind exchanges are apportionable to Minnesota in the year they are recognized, using that year's apportionment rate. We did not find a requirement that a closing agent withhold Minnesota income tax from a nonresident's real estate proceeds; confirm with your closing agent and tax advisor.

Questions Minnesota sellers ask

What is Minnesota's deed tax on an intermediary exchange?

The deed to the intermediary is taxed on the value of the property at 0.33% of net consideration. The deed from the intermediary to the buyer is taxed on the intermediary's fee.

Who pays the deed tax?

The Department's page says that in a direct exchange each party, as grantor, pays the tax on its own deed. For a sale, the statute sets the tax and the due date but not the payer on the pages we reviewed, so your contract and your closing agent decide.

Does the replacement property have to be in Minnesota?

Nothing we found in the Department's deed tax guidance requires it. Whether Minnesota income tax conforms to your exchange is a question for your tax advisor. See also the exchange readiness check.

Related

• Exchange preparation sheet
• Checklist for closing professionals
• Fees

Sources

• Minnesota DOR, Deed Tax Real Property Exchange (checked September 30, 2026)
• Minn. Stat. 287.21 (checked September 30, 2026)
• Minnesota DOR, Deed Tax Rate (checked September 30, 2026)
• Minnesota DOR, How Minnesota Taxes Nonresident Income (checked September 30, 2026)