I owned a home with my sister and her husband. What happens with taxes?

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Q. I own a house in New Jersey with my deceased sister and her husband. If we sell our house and only I moved to Maryland, do I need to pay any exit tax? The property value is $490,000, the agency commission is 5% and there is no mortgage. So my share is $245,000 minus the commission and other expenses. The home was purchased in 2002 for $220,000 and we spent $20,000 on improvements. Do I need to pay capital gain tax?
— Sister

A. We’re sorry to hear about your sister.

But we’re sorry to see you leave New Jersey.

There are a few unknowns here that would have an impact on your tax liability.

You didn’t say whether you lived in the home or not. That’s essential, even if the pricing means you think you’re eligible for a capital gains exclusion.

You should speak to your tax advisor with the specifics of your situation to see whether or not you qualify.

It’s important to understand there is no exit tax, said Ken Bagner, a certified public accountant with CLA in Livingston.

“It is tax withholding that takes place in New Jersey upon sale of the house, which you then receive as a credit when you file on your New Jersey return,” he said. “You report your New Jersey income and if the tax is less than the credit, you receive a refund and vice versa.”

There are some circumstances when tax does not need to be withheld, or less tax could be withheld, he said.

That’s why you should speak to a tax advisor specifically about the purchases of the sale.

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This story was originally published on Sept. 8, 2023.

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