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

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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

Email your questions to moc.p1568988423leHye1568988423noMJN1568988423@ksA1568988423.

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

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