I made a profit on my home sale. What taxes are due?

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Q. I have been a resident of Florida for the past 16 years and have just sold a two-family family house in New Jersey. Do I need to file anything other than an A3128 for a refund? We did make a substantial profit. What should I expect?
— Seller

A. Congrats on your home sale.

It looks like you may need to pay taxes to New Jersey on your profit.

Unless the house was used solely as a personal residence and falls within the guidelines for the sale of a personal residence — which is unlikely given that you’ve lived in Florida for 16 years — you should expect a tax bill, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

You will have to file Form NJ-1040-NR as a non-resident, he said.

The profit will be calculated based on the difference between the selling price and the cost basis,” Karu said. “ If the property has been rented, there may be depreciation recapture as well.”

Upon the sale of a business, business interest, or real property in New Jersey, a non-New Jersey resident is subject to New Jersey gross income tax on the profit from that sale, he said.

“In order for the State of New Jersey to be sure that it gets paid, taxes are withheld at closing,” Karu said. “While people call it an ‘exit tax,’ the reality is that the payment is simply an estimate tax payment against the tax that gets calculated when the non-resident income tax return is filed.”

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This story was originally published on Jan. 24, 2020.

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