11 Dec I’m a Florida resident now. Will I owe the exit tax on my N.J. home?
Q. I am now a legal Florida resident as of September 2020. I only plan to be in New Jersey to finalize my home sale. I will file my final 2020 New Jersey tax return by April 2021. My W-4 will also be changed to reflect my full-time Florida status as of Jan. 1 2021 as well. If my property sells in 2021 and now being a Florida resident am I subject to the exit tax or capital gains taxes?
— Moving out
A. Let’s start with the so-called exit tax.
On home sales, this tax is withheld based on the sale price of a home, but it’s not an extra tax. Instead, it’s an estimated tax that New Jersey withholds to make sure people who leave the state file their final tax returns.
Once you are truly a resident of a state other than New Jersey, you only would pay New Jersey gross income tax on income earned in New Jersey or sourced in New Jersey, such as rental income, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.
“The sale of your personal residence would only have tax consequences if the gain exceeded the statutory limit of $250,000 per spouse,” he said. “If the property referenced in your question is a rental property, then you will pay tax on the net rental income and the gain on its sale.”
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This story was originally published on Dec. 11, 2020.
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