If you’re planning to move out of state and sell your property, understanding the new jersey exit tax is crucial. Many homeowners are caught off guard by this tax, leading to frustration and unexpected financial burdens. At Garden State Cash Homes, we specialize in helping New Jersey homeowners sell their homes fast and as-is. Here’s everything you need to know about how to minimize or avoid the New Jersey exit tax when selling your home.

What Is the New Jersey Exit Tax?

The New Jersey exit tax isn’t actually a separate tax, but rather a prepayment of the state’s income tax on any gain from the sale of real estate by non-residents. If you sell your New Jersey home and plan to move out of state, the state requires a percentage of the sale price or gain to be withheld at closing to ensure income tax compliance. This law was enacted to prevent sellers from skipping out on taxes owed after leaving the state.

Who Is Affected by the New Jersey Exit Tax?

The New Jersey exit tax applies primarily to individuals who are no longer New Jersey residents at the time of closing or who declare they are leaving the state after selling their property. If you’re still a resident of New Jersey and plan to remain one, you typically won’t be subject to the New Jersey exit tax. However, if you check the box at closing that says you’re moving out of state, the tax will likely be applied.

How Much Is the New Jersey Exit Tax?

The amount of New Jersey exit tax withheld at closing depends on the higher of two values:

2% of the total selling price, or
8.97% of the estimated gain from the sale.

This means if you’re selling your home for $400,000, and your profit is $100,000, the New Jersey exit tax withheld could be either $8,000 (2% of $400,000) or $8,970 (8.97% of the gain), whichever is higher. You can reclaim any overpayment when you file your New Jersey state income tax return, but that could take months.

How to Minimize the New Jersey Exit Tax

There are several ways to reduce your liability for the New Jersey exit tax:

Accurately Calculate Your Cost Basis: Include all improvements you’ve made to the property, such as renovations or additions. This increases your cost basis and reduces your taxable gain, lowering the New Jersey exit tax.
Stay a Resident Until After the Sale: If possible, delay your move and remain a legal New Jersey resident until the closing date. This may exempt you from the New Jersey exit tax altogether.
Sell to a Local Buyer Like Garden State Cash Homes: We’re based in New Jersey and understand all the nuances of local taxes. When you sell to us, we guide you through the paperwork and help you handle the New Jersey exit tax properly, potentially saving you time and money.
Use the Correct Forms: Make sure your attorney or title agent uses the right New Jersey forms at closing (especially Form GIT/REP). An error here can unnecessarily trigger the New Jersey exit tax even if you may not owe it.
Consult a Tax Professional: Before you list your home, speak with a CPA or tax advisor who’s familiar with New Jersey real estate laws. They can help you legally minimize the New Jersey exit tax based on your unique situation.

Can You Avoid the New Jersey Exit Tax Completely?

While it’s difficult to completely avoid the New Jersey exit tax if you’re moving out of state, there are legal methods to limit the amount withheld. If your profit from the sale is minimal or if you qualify for an exclusion (like the $250,000/$500,000 home sale exemption for primary residences), you may owe little or nothing. However, the New Jersey exit tax still might be withheld at closing and you’ll need to file a tax return to get a refund.

At Garden State Cash Homes, we work with homeowners every day who are concerned about the New Jersey exit tax. Our goal is to make your selling process fast, transparent, and cost-effective. We’ll walk you through the entire process and make sure you’re not paying more than you need to.

Final Thoughts

Understanding the New Jersey exit tax is essential when selling your home, especially if you’re relocating. While it may seem like a penalty, it’s simply the state’s way of ensuring tax compliance. By working with a knowledgeable team like Garden State Cash Homes, you can navigate the process smoothly, reduce your tax burden, and avoid surprises at closing.

If you’re ready to sell your New Jersey home fast and want expert help handling the New Jersey exit tax, contact Garden State Cash Homes today. We’re here to make the process as easy and stress-free as possible.