02 Nov Can you avoid the exit tax if you’re over 65?
Q. I have been told that you are exempt from the exit tax if you sell your house and you are 65 years old or older. Is that correct?
When it comes to the so-called exit tax, your age does not matter.
The exit tax is really an estimated tax, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.
“When a nonresident individual of any age sells a New Jersey residence, in order for the closing to take place, an estimated payment must be made,” he said. “This payment must be 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.”
The tax is so that nonresidents would file a nonresident tax return with the state rather than leave the state without filing.
Prior to 1997, when one sold their principal residence they were entitled to a once-in-a-lifetime exclusion from gain on sale of the principal residence up to $125,000 if they were over age 55, Becourtney said.
For both federal and New Jersey tax purposes, age is no longer relevant when it comes to selling your home.
“The current law excludes the first $250,000 of gain — 500,000 if a married joint filer — as long as the taxpayer owned and used the residence as their principal residence for a period of at least two out of the preceding five years as of the sale date,” he said.
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This story was originally published on Nov. 2, 2020.
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