We all know someone who has sold their home in New Jersey to move to another state and complained about the dreaded New Jersey “Exit Tax.” But is the Exit Tax as dreadful as it sounds?

It is the pre-payment of income tax on the proceeds from the sale of your home. Whether you are a resident or non-resident, all home owners in New Jersey pay income taxes on their home sale proceeds unless they qualify for an exemption.

In essence, the Exit Tax is a withholding requirement imposed by the state to make sure that you pay your income taxes on the sale proceeds before you move to another state.
What is the Exit Tax?
See NJ Division of Taxation – FAQs on GIT Forms Requirements for Sale/Transfer of Real Property in New Jersey (state.nj.us)

How do nonresident sellers/grantors calculate the estimated Gross Income Tax payment on the sale/transfer of real property in New Jersey?

In accordance with N.J.S.A. 54A:8-9(a), the gain on the sale or transfer is multiplied by the highest rate of tax (10.75% effective 8-1-2004) for the taxable year provided in N.J.S.A. 54A:2-1. But the estimated tax payment shall not be less than 2% of the consideration for the sale or transfer stated in the deed affecting the conveyance.

If you are selling your home and moving to another state, you should speak with your attorney and your accountant about whether the Exit Tax applies to you or whether you qualify for one of the state’s sale/transfer exemptions.

Seek the wisdom of your accountant about filing a timely tax return for the year you sold your home or for the year you are selling your home. You may be entitled to a tax refund.

Let’s discuss your matter during a confidential consultation. Please call 908-946-8227 and ask for Stefanie Gagliardi or contact me at Stefanie@gmnj-legal.com.