09 Sep How does the N.J. ‘exit tax’ work for home sellers?

Q. Can you explain the New Jersey exit tax for home sellers who are leaving the state? Also are there special forms for this tax?
— Seller

A. There really is no exit tax. It’s really an estimated tax.

When a nonresident individual sells a New Jersey residence, in order for the closing to take place, an estimated payment must be made equal to the greater of 10.75 percent of the taxable gain realized – based on the highest marginal income tax rate) or 2 percent of the sales price, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

“If a loss was incurred on the sale, despite no tax being incurred, 2 percent of the sales price must be paid at closing,” he said. “As a result, the seller must file a New Jersey nonresident income tax return the following year to claim a refund of the tax payment.”

And yes, there are five forms for home sellers to navigate depending on your situation:

1. Form GIT/REP-1, Nonresident Seller’s Tax Declaration
2. Form GIT/REP-2, Nonresident Seller’s Tax Prepayment Receipt
3. Form GIT/REP-3, Seller’s Residency Certification/Exemption
4. Form GIT/REP-4, Waiver of Seller’s Filing Requirement of GIT/REP Forms and Payment
5. Form GIT/REP-4a, Waiver of Seller’s Filing Requirement of GIT/REP Forms and Payment for Corrected Deed with no Consideration

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This story was originally published on Sept. 9, 2019.

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