{"id":2587,"date":"2015-01-22T16:03:20","date_gmt":"2015-01-22T16:03:20","guid":{"rendered":"http:\/\/www.ua-cpas.com\/?p=2587"},"modified":"2019-01-23T02:21:08","modified_gmt":"2019-01-23T02:21:08","slug":"nj-exit-tax","status":"publish","type":"post","link":"https:\/\/www.ua-cpas.com\/blog\/index.php\/2015\/01\/22\/nj-exit-tax\/","title":{"rendered":"Hit by the NJ Exit Tax on Sale of Real Estate? You Can Recoup Your Money"},"content":{"rendered":"

The New Jersey \u201cExit Tax\u201d, which became law in 2007, requires the real estate seller to file a GIT\/REP form<\/p>\n

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Exiting NJ?<\/figcaption><\/figure>\n

(Gross Income Tax form) in order to record a Deed for\u00a0 the transfer of his property.<\/p>\n

When a non-resident sells property, New Jersey will withhold this income tax in the amount of either 8.97 percent of the profit or 2 percent of the total selling price, whichever is higher. Therefore, even if the property is sold at a loss, tax must be withheld to fulfill the two percent requirement.<\/p>\n

What Can I do?<\/b><\/span><\/p>\n

It\u2019s important to realize that while the Exit Tax requires a substantial withholding<\/span>, it doesn\u2019t have any impact on the actual tax liability.<\/span> If the seller files a NJ tax return he is refunded the difference between what was withheld and what is owed. This recovery can be very significant when one factors in the selling costs and original purchase price, both of which reduce the taxable gain.<\/p>\n

Estates Should Pay Special Attention<\/b><\/span><\/p>\n

The recovery is often even greater in the case of real estate sold by an estate, as there is a step up in cost basis which would typically minimize a gain on the sale, often resulting in full recovery of the entire withholding. To quickly expedite the recovery of the excess withholding, it would be prudent to timely file Form NJ1040 NR (individual) or NJ1041 (estate\/fiduciary).<\/p>\n

How do I know if I am considered a \u201cnon-resident\u201d?<\/b><\/span><\/p>\n

So who\u2019s considered a \u201cresident\u201d and who\u2019s a \u201cnon-resident\u201d with regard to this tax? The law defines a resident taxpayer as one of the following:<\/p>\n