Are active duty military personnel exempt from the exit tax?

Q. Are active duty military personnel exempt from the 2 percent exit tax when they sell/transfer their former home in New Jersey?

— Seller

A. Your service won't exempt you from the so-called exit tax.

But here’s the thing: the exit tax isn’t actually an extra tax. It’s an estimated tax payment.

New Jersey residents who sell a home and maintain New Jersey residency file form GIT/REP-3 Seller’s Residency Certification/Exemption, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

“The completed GIT/REP-3 form is due at closing and exempts the seller from paying the estimated income tax payment at that time,” Kiely said. “Instead, the resident seller will pay all necessary income tax, including tax on any capital gain from the sale of property, when it comes time to file the NJ-1040 Resident Income Tax Return.”

But New Jersey residents who sell their New Jersey home and move outside of this state are considered nonresidents for the purpose of the sale, Kiely said.

New Jersey may require an estimated tax payment at closing - the state wants to make sure it gets whatever money its due - sort of like an insurance policy in case a nonresident moves and never files a final tax return for New Jersey.

But when you do file the nonresident tax return, you’d report any gain or loss, and you could get back that withholding.

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