Montana has no transfer tax, but it keeps a claim on the deferred gain.

Montana has no tax on the transfer of real property, but a 1031 exchange of Montana land or buildings still leaves a Montana trail. The Realty Transfer Certificate filed at recording has a box for a transfer that is part of a 1031 or 1033 exchange, and a nonresident who exchanges out of Montana must report the deferred Montana-source gain to Montana if and when it is recognized for federal tax.

onezero3one acts as qualified intermediary for exchanges of Montana 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
Realty Transfer Certificate has a 1031/1033 box	Montana requires a Realty Transfer Certificate (Form RTC) filed with the county clerk and recorder when a deed is presented. Part 4 has a checkbox for a transfer that is part of a 1031 or 1033 exchange. The form says any gain is Montana source income and the Department cross-matches certificates with income tax returns. Every Montana deed, including exchange deeds.	Closing agent, at recording	Montana Department of Revenue, Realty Transfer Certificate Form RTC (current PDF, modified 2026-07; accessed 2026-09-30) Checked September 30, 2026
Deferred Montana-source gain is reported later by nonresidents	Under ARM 42.2.308, gain on Montana real property keeps its Montana source income character and must be reported if and when it is recognized federally. On a 1031 exchange the gain shown on Form 8824 is generally the Montana source income, and the amount recognized for Montana never exceeds the federally recognized gain. Nonresidents relinquishing Montana real property in a 1031 exchange, including into out-of-state replacement property.	Seller and tax advisor	Montana Administrative Rules, ARM 42.2.308 (text read as reproduced on Cornell LII mirror and in search extract of the rules.mt.gov page; rules.mt.gov page itself needs JavaScript) Checked September 30, 2026
No state or local transfer tax	The Montana Constitution (Art. VIII, sec. 17, adopted by CI-105 in 2010) bars the state and local governments from taxing the sale or transfer of real property, so no transfer tax applies to either deed. All Montana real property transfers.	Closing agent	Montana Constitution Art. VIII, sec. 17 (Montana Code Annotated, mca.legmt.gov) Checked September 30, 2026

No transfer tax on the deed

The Montana Constitution provides that "The state or any local government unit may not impose any tax, including a sales tax, on the sale or transfer of real property." That provision, approved by voters in 2010, means there is no state or local transfer tax to plan around on either deed of an exchange. Recording fees and title charges are separate and still apply.

The Realty Transfer Certificate

Montana law requires a Realty Transfer Certificate (Form RTC) from any party transferring real property or presenting a deed or instrument for recording. It is filed with the county clerk and recorder when the deed is presented. Part 4 of the form, the description of the transfer, lists checkboxes that include "Part of 1031 or 1033 exchange." The form warns that failing to file an accurate and complete form may result in a $500 penalty, six months in jail, or both.

The certificate also states that any gain on the transfer is Montana source income and should be reported to the Department of Revenue on the appropriate income tax return, and the Department says it uses the owners' identification numbers to cross-match certificates with income tax returns. Closing agents should tick the exchange box when the Montana deed is part of an exchange; sellers should expect the Department to see the sale.

Nonresidents: the gain stays Montana-source

Under Montana Administrative Rule 42.2.308, gain realized on the transfer of Montana real property keeps its Montana source income character and must be reported if and when the gain is recognized for federal income tax purposes. When Montana property is relinquished in a Section 1031 exchange, the gain realized shown on Form 8824 is generally the amount of Montana source income. The rule includes an example in which a nonresident exchanges Montana land for Wyoming property: the full gain on Form 8824 is Montana source income, the recognized portion is reportable in the year of sale and the deferred remainder is reportable if and when it is recognized federally. The rule says the Montana source income recognized never exceeds the gain recognized for federal income tax purposes.

In practice this means a nonresident who exchanges out of Montana should expect to owe Montana tax on the deferred gain later, even though the replacement property is in another state. Keep Form 8824 and your basis records, and ask your tax advisor how this applies to your return. This page does not state a Montana rule on withholding at closing, because we have not confirmed one from an official Montana source.

What to settle before closing

1. Residency: if the seller does not live in Montana, tell the tax advisor early; the gain is Montana source income either way.
2. Recording: the closing agent completes the Realty Transfer Certificate and marks the exchange box.
3. Dates: day 45 and day 180 run as in any exchange; the deadline calculator gives both.

Questions Montana sellers ask

Does Montana charge a transfer tax on a deed in an exchange?

No. The Montana Constitution bars state and local taxes on the sale or transfer of real property.

Is there an exchange box on the Montana Realty Transfer Certificate?

Yes. Part 4 includes "Part of 1031 or 1033 exchange."

I live in Washington and am exchanging Montana land for property in my state. Does Montana still get a say?

Under ARM 42.2.308 the gain on the Montana property keeps its Montana source character, and the deferred Montana gain must be reported if and when it is recognized federally. Confirm with your tax advisor.

Related

• Exchange preparation sheet
• Checklist for closing professionals
• Fees

Sources

• Montana DOR, Realty Transfer Certificate (checked September 30, 2026)
• ARM 42.2.308 (checked September 30, 2026)
• Montana Constitution Art. VIII, sec. 17 (checked September 30, 2026)