21 Sep Why isn’t the ‘exit tax’ collected when you file a tax return?
Q. I understand that the “exit tax” is actually an estimated tax on the sale of a home if you’re moving out of state. Why isn’t it just collected when you file a tax return?
A. The exit tax, as you said, isn’t a separate tax. It’s an estimated tax based on the profit from the sale of your home.
Rather than wait for you to file a non-resident tax return, the state withholds the tax at the time of the sale. This is to protect the state from you skipping town and never filing the return.
When you sell property that is based in New Jersey, any gains are most likely taxable in New Jersey regardless of whether or not you live in the state, said Jonathan Donenfeld, a certified public accountant with JLD Tax & Accounting in Jersey City.
“If you are a non resident, tax is required to be withheld on the sale,” he said. “When you file your taxes for the year of the sale, you can request a refund for any overpayment of taxes that were withheld on the sale.”
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This story was originally published on Sept. 21, 2020.
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