Will I have to pay the exit tax when I sell my NJ home?

By Karin Price Mueller | NJMoneyHelp.com for NJ.com

My question is how much exit tax will I have to give New Jersey when I close on my house. I am moving to Florida. I will not have a taxable gain. I bought the house for $125,000, and am selling it for $300,000. I meet the qualifications to exclude a gain of $250,000. So do I have to put up the exit tax money with the state and wait to get it back when I file my 2021 return? Or is there a way to avoid having to put up the money?

— Seller

A. Congrats on selling your home for a profit.

Based on the information you provided, you won’t be subject to the so-called exit tax.

The exit tax is not actually a separate tax, but an estimated tax payment to cover the income tax resulting from the gain on the sale of real estate in New Jersey, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

When you sell a house in New Jersey you are required to pay income taxes on the taxable gain, he said. This is so regardless of whether it’s your 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. “In your case there will be no taxable gain because the house was your principal residence.”

At closing, your attorney will prepare a State of New Jersey Seller’s Residency Certification/Exemption Form (Form GIT/REP–3), Kiely said.

Your attorney will check box #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. Since 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 will be required,” Kiely said.

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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.