07 Feb Must I report the sale of a Florida home on my N.J. taxes?
Q. As a New Jersey resident, do I need to report the sale of a Florida home? The Florida home was not my primary residence.
A. Congrats on the sale.
And yes, as a New Jersey resident, you must report all of your income regardless of where that income is made.
New Jersey tax is calculated on the gross income of its residents, said Laurie Wolfe, a certified financial planner and certified public accountant with Peapack Private Wealth Management in New Providence.
“New Jersey then provides a credit for taxes paid to other jurisdictions, however, since Florida does not have a personal income tax, there would not be a credit on your New Jersey return since there will be no taxes paid to Florida,” Wolfe said.
Let’s go a little deeper.
The gain or loss is determined by taking the sales price, less selling costs of the property, and subtracting what you paid for the property plus any major improvements you put into the property, Wolfe said. If your home was rented or used for business, the depreciation would have to be accounted for, too.
It looks something like this:
Sales price minus selling costs, including commissions, attorney fees, transfer taxes, etc. equals the net sales price.
Then take the original cost of home, including closing costs such as legal fees, recording fees, survey fees, transfer taxes and title insurance, plus the cost of major improvements — not repairs — to the home, equals the total cost of the home.
The gain or loss on the sale of the home is the net sales price minus the total cost of the home, Wolfe said.
She said Schedule NJ-DOP is the New Jersey form used to list all sales transactions, including sales of stocks and bonds.
“If the net of your transactions is a loss, a zero is entered for the total and no amount is included in the calculation of New Jersey taxable income,” she said. “This is because New Jersey taxes gross income and does not allow losses.”
If the net of the transaction on the Schedule NJ-DOP is a gain, it carries over to the NJ-1040 and is used in the calculation of taxable income, Wolfe said. The New Jersey tax is calculated on the taxable income.
To prevent double taxation, New Jersey allows a credit for taxes paid to other jurisdictions, Wolfe said.
“So, for example, if your second home was in New York, you would pay taxes to New York on the sale and then New Jersey would give you a credit for taxes you paid to New York, subject to limitations,” she said. “However, Florida does not have an income tax. Therefore, if you are a New Jersey resident and you sell a Florida property, the gain is taxed by New Jersey.”
To make sure you understand the process, consider consulting with a tax professional who can look at the specifics of your situation.
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This story was originally published on Feb. 7, 2022.
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