14 Jul How much will I have to pay in tax when I sell my home?
Q. I am 81 years old. I am going to sell the house in the near future to move to a Continuing Care Retirement Community (CCRC) near my son in Pennsylvania. If I paid $400,000 and can sell the house for $600,000, do I have to pay capital gains on the $200,000 profit? Would I have to pay the exit tax?
— On the move
A. Here’s how it works.
We’re assuming you’ve lived in this house for at least 24 months out of the previous 60 months.
When you sell a house in New Jersey you are required to pay income taxes on the taxable gain, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
He said this happens whether it’s a principal residence, second home or investment property. It also applies to residents, non-residents or soon-to-be former residents. The income tax applies to the taxable gain on the home sale, he said.
“Federal law, which New Jersey follows, allows for an exclusion of up to $250,000 of gain for a single person and $500,000 of gain for a married couple,” Kiely said. “In your case, there will be no taxable gain because the house was your principal residence and your gain was $200,000.”
At closing, your attorney will prepare a State of New Jersey Seller’s Residency Certification/Exemption Form called GIT/REP–3.
Your attorney will check Box No. 2, which states: “The real property sold or transferred is used exclusively as a principal residence as defined in 26 U.S. Code section 12”.
If your home was your principal residence for at least 24 out of the prior 60 months, there will be no taxable gain and no estimated tax payment — what’s known as the exit tax — will be required.
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This story was originally published on July 14, 2022.
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