01 Mar Do I have to pay the exit tax?
Q. I’m planning to sell my New Jersey home this year. I’m temporarily moving to Pennsylvania, where I will rent, and then I will probably buy a condo in a different part of New Jersey. Will I have to pay the exit tax?
— Moving around
A. For starters, there is really no such thing as the exit tax.
What you’re referring to is actually just an income tax on the sale of a home in New Jersey. It’s really just an estimated tax payment.
“If you are a non-resident, then the income tax at an estimated amount is required to be withheld at the house closing,” said David Ritter, chair of the tax practice at Brach Eichler in Roseland. “The deed could not be recorded without the income tax withholding.”
But then, in the following year, you would file a non-resident income tax return with New Jersey and claim a credit for the prior payment made at the real estate closing, he said.
This may very well result in a refund of some or all of the previously paid income tax.
So the reason for the exit tax is that New Jersey wants to make sure those who leave the state – or those who live elsewhere but sell property here – pay the tax that’s due on the home sale.
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