Will we owe the exit tax when we sell our home?

Ask NJMoneyHelp

Photo: pixabay.com

Q. We are non-residents of New Jersey. We have what is considered an investment property – it was our primary residence for 13 years before moving out of state in 2011 – which we are selling. I understand the “exit tax” will be required. We are moving back to New Jersey in 2019 will be purchasing a home. Would we be able to apply for a refund of the exit tax?
— Coming back soon

A. It’s a great question, and another example of how the so-called exit tax is often misunderstood.

There really is no exit tax, said Steven Craffen, a certified financial planner with Stonegate Wealth Management in Oakland.

He said when someone sells a home in New Jersey, the state requires the closing attorney to withhold the greater of 8.97 percent of the profit or 2 percent of the selling price – whichever is greater.

“This is to force you to file a tax return in New Jersey,” Craffen said. “You may then receive a refund for all or part of the tax that is withheld if you do not owe it.”

So the refund, he said, is not related to your residency. It is instead related to your taxable income in New Jersey for the year you sold the home or property, including any capital gain that is realized on the sale.

To understand more about the exit tax, read this.

Email your questions to moc.p1545138382leHye1545138382noMJN1545138382@ksA1545138382.