By Slava Zborovsky · Updated
New Jersey has no separate exit tax. A seller who is a nonresident at closing must make an estimated income tax payment (Form GIT/REP-1) of the gain times 10.75%, but never less than 2% of the sale price, unless an exemption applies. A main home whose entire gain is excluded under the federal $250,000 or $500,000 rule qualifies for an exemption, and any overpayment comes back when you file your New Jersey nonresident return or a refund claim.
The most searched question about selling in New Jersey
Type "selling a house in nj" into Google and the first suggestion is "and moving out of state". Retirees heading to Florida or the Carolinas, and families relocating for work, all run into the same three-letter form set: GIT/REP.
Who counts as a nonresident
This is the part that surprises people. The Division of Taxation says that when you move out of New Jersey on or after the day of transfer, you are considered a nonresident, and part-year residents are considered nonresidents. In other words, if your plan is to close and then move, you are a nonresident seller for these forms.
How the payment is calculated
Under N.J.S.A. 54A:8-9(a), the gain on the sale is multiplied by New Jersey's highest income tax rate, 10.75%. The payment cannot be less than 2% of the total consideration on the deed, and the 2% minimum applies even if you have no gain.
Example: a nonresident sells for $2,200,000. Even with little or no gain, the minimum payment at closing is $44,000, submitted with the deed and forwarded to the State.
Where owners hold the property as tenants in common and only one is a nonresident, that owner's payment is based on their ownership percentage.
The minimum payment at Bergen County prices
Two percent of the price is the floor. If 10.75% of your gain is larger, that is the payment instead.
| Sale price | 2% minimum at closing |
|---|---|
| $1,000,000 | $20,000 |
| $1,500,000 | $30,000 |
| $2,000,000 | $40,000 |
| $2,500,000 | $50,000 |
| $3,000,000 | $60,000 |
| $4,000,000 | $80,000 |
Source: NJ Division of Taxation, GIT/REP FAQs (N.J.S.A. 54A:8-9(a)).
Resident or nonresident at closing
Which form you sign depends on where you live on the day of closing:
| Seller at closing | Form | Payment |
|---|---|---|
| New Jersey resident staying in New Jersey | GIT/REP-3, certifying residency | None |
| Nonresident, or moving out on or after the closing day | GIT/REP-1 (or GIT/REP-2 in advance) | 10.75% of gain, at least 2% of price |
| Nonresident whose entire gain is excluded as a main home | GIT/REP-3, claiming the exemption | None |
| Corporation | GIT/REP-3, box 5 | None |
Installment sales and other special cases
If the buyer pays you over time and the deed is delivered at closing, the Division says the nonresident seller pays the 2% minimum on the full consideration in the deed at closing, then may seek a refund based on what was actually received that year. If the deed is not delivered until the final payment, the 2% is paid on that final payment, after tax has been paid on the installments as they came in.
Co-owners who are not all nonresidents split the calculation by ownership share. A property in two counties, a partial 1031 exchange, or a trust as seller each has its own answer in the Division's FAQs; your attorney will know which applies.
The forms
The person who signs the deed signs the form. They are submitted at closing with the deed:
- GIT/REP-1: the estimated payment, made at closing.
- GIT/REP-2: a prepayment receipt from the Division before closing, which may reduce recording delays.
- GIT/REP-3: the seller's residency certification or exemption. New Jersey residents certify residency here, and nonresidents use it to claim an exemption, such as a main home whose entire gain is excluded under Section 121.
The primary residence exemption
If the home was used exclusively as your principal residence within the meaning of Internal Revenue Code Section 121 and you meet the requirements in IRS Publication 523, you can claim the exemption even though you are moving out of state. The Division adds one condition that matters: if the entire gain cannot be excluded, you do not qualify for the exemption.
For many long-time owners in Saddle River, Ridgewood or Upper Saddle River, the gain is larger than $500,000, so the exemption is not available and the payment is due. Work out your gain early; see capital gains tax when you sell in New Jersey.
Getting the money back
The payment is an estimate, not the final tax. Your actual New Jersey tax on the gain is settled on your New Jersey nonresident return (Form NJ-1040NR), and you can claim back anything paid above it. You do not have to wait for the return: the Division says a nonresident seller can file Form A-3128 to claim a refund before the end of the tax year.
A timeline for leaving New Jersey
In order:
- Before you list: estimate your gain with your accountant and decide whether you will claim an exemption or make the payment.
- Before November 2: if you are 65 or older, file your property tax relief application for the year you lived here. See ANCHOR, Stay NJ and Senior Freeze.
- At contract: tell your attorney you are leaving New Jersey so the right GIT/REP form is ready for closing.
- At closing: sign GIT/REP-1, -2 or -3 with the deed.
- After closing: file Form A-3128 or your NJ-1040NR to recover any overpayment.
What the rest of the sale costs
The estimated payment comes on top of the normal seller costs: the Realty Transfer Fee, the Graduated Percent Fee over $1 million, commission and attorney fees. See what it costs to sell a house in New Jersey, or price it yourself on the closing-cost calculator.
Selling soon? Get a written valuation or use the NJ closing-cost calculator.
- Does New Jersey have an exit tax?
- No. Nonresident sellers make an estimated income tax payment at closing, at least 2% of the sale price or 10.75% of the gain if higher, which is credited against their actual New Jersey tax.
- What is the NJ exit tax rate?
- A nonresident seller's estimated payment at closing is the gain times 10.75%, New Jersey's top income tax rate, but never less than 2% of the sale price (N.J.S.A. 54A:8-9). It is a prepayment of income tax, credited on the nonresident return, not a separate tax.
- If I move out of NJ after closing, am I a nonresident seller?
- Yes. The Division of Taxation says that if you move out of New Jersey on or after the day of transfer, you are considered a nonresident for the GIT/REP forms.
- Can I avoid the 2% NJ withholding when selling my home?
- Yes, if the home was your principal residence and the entire gain is excluded under Section 121, you can claim the exemption on Form GIT/REP-3. If any gain is taxable, the exemption does not apply.
- How do I get the NJ estimated tax back?
- File your New Jersey nonresident return (NJ-1040NR), or file Form A-3128 for a refund before the end of the tax year.
Sources
Written by Slava Zborovsky, Broker Associate with The Agency One Rock and a licensed New Jersey broker since 2007. About Slava · LinkedIn
