02 Jun My brother is selling his home without profit. Will he owe the exit tax?
Q. My brother is selling his home in New Jersey without any gain. The price of the home will cover his existing mortgage and he will be moving in with me in Pennsylvania. Will he pay the New Jersey exit tax?
A. The exit tax is not a separate tax, but an estimated withholding by New Jersey at the time of closing.
The state does this to make sure it will get what it’s owed in case the seller leaves the state, taking their profits with them.
The withholding is either 2% of the sales price or 8.97% tax on the profit, whatever is higher, said Ken Bagner, a certified public accountant with CLA in Livingston.
But if there isn’t a gain, he can expect to get the money back.
“If you are not subject to tax you can claim the funds back upon filing your New Jersey income tax return,” he said. “You may be able to file a GIT/REP3 form for an exemption to avoid making the estimate.”
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This story was originally published on June 2, 2023.
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