12 May We’re leaving N.J. What tax is owed on our home sale?

Q. My wife and I are selling our New Jersey home after raising a family and living there for 29 years. I landed a new job so we are moving to another state. We have secured a 12- month rental and plan to move there as soon as our house closes, which should be in the next 45 to 60 days. What should I anticipate for taxes and how can I minimize what we owe?
— Sellers

A. Congratulations on your new job.

But we’re sorry to hear that you are departing the Garden State.

It’s possible you won’t have any tax liability from the upcoming sale of your New Jersey residence, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

“As a joint filer having owned and used the New Jersey home as your principal residence for a period exceeding two out of the preceding five years, you are entitled to exclude up to $500,000 of any gain realized on the sale,” Becourtney said.

Keep in mind that all closing costs – including realtor commissions, transfer taxes and attorney fees – reduce the gain, he said.

And over 29 years of homeownership, you probably made some capital improvements, which would add to your original purchase price and also lower the gain. These rules apply for both federal and New Jersey tax purposes, Becourtney said.

In the event you end up with a gain greater than $500,000, the excess amount will be a long-term capital gain that will be combined with all other capital gains and losses, he said.

“If you have other capital assets with unrealized losses, this might be a good time to sell some of those assets to realize the capital losses if there is a taxable gain from the sale of your home,” he said.

He said for New Jersey, you will be filing a part-year resident income tax return for 2022, reporting income received during the portion of the year you resided in New Jersey, pretty much the first half of the year. So only capital losses generated during this portion of the year could offset a taxable gain from the sale of your home, he said.

Consider working with a qualified tax preparer who can look at the specifics of your situation so you can be prepared for any tax bill.

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This story was originally published on May 12, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.