If you’re planning to sell your home and move out of the state, you’ve probably heard about the New Jersey exit tax. But what is it exactly, and does the new jersey exit tax apply to your situation? Understanding the New Jersey exit tax is crucial for any homeowner preparing to sell, especially if you’re relocating out of state. At Garden State Cash Homes, we help homeowners navigate these complicated processes every day. This guide will help you figure out how the New Jersey exit tax works and how it might impact your bottom line.

What Is the New Jersey Exit Tax?

The term New Jersey exit tax can be misleading. It’s not an additional tax imposed only on those leaving the state. Rather, it refers to a tax withholding required at the closing of a real estate transaction when a property is sold by someone who is no longer a New Jersey resident or plans to move out after the sale. The New Jersey exit tax ensures that sellers pay their required state income taxes on the capital gains from the property sale.

Why the New Jersey Exit Tax Exists

The New Jersey exit tax was introduced to prevent former residents from selling property and avoiding paying their fair share of New Jersey state taxes. Since capital gains taxes can be substantial, the state wants to ensure it collects what’s owed. By withholding a portion at closing, the New Jersey exit tax guarantees that taxes are paid even if the seller no longer resides in the state.

How Much Is the New Jersey Exit Tax?

The amount withheld under the New Jersey exit tax is either 8.97% of the gain from the sale or 2% of the total selling price—whichever is higher. This amount is not an extra tax; it’s a prepayment of your income tax liability to the state. When you file your New Jersey tax return, you may be eligible for a refund if your actual tax owed is less than the amount withheld under the New Jersey exit tax.

Who Needs to Pay the New Jersey Exit Tax?

Not everyone selling a home in New Jersey is subject to the New Jersey exit tax. If you’re a resident of New Jersey and plan to remain so after selling your property, the New Jersey exit tax likely doesn’t apply to you. However, if you’re moving out of state or already live elsewhere, the New Jersey exit tax kicks in. Non-residents, estates, and trusts are all subject to the New Jersey exit tax when they sell property located in the state.

Avoiding Surprises at Closing

Sellers are often caught off guard by the New Jersey exit tax. It’s important to work with professionals who understand how the New Jersey exit tax affects your unique situation. At Garden State Cash Homes, we’ve helped countless sellers avoid last-minute issues at the closing table due to misunderstandings around the New Jersey exit tax. We recommend reviewing your potential tax liability well before listing your property.

How the New Jersey Exit Tax Affects Investors and Out-of-State Owners

If you’re an investor or landlord who owns property in New Jersey but lives elsewhere, you will almost certainly encounter the New Jersey exit tax upon selling. Many out-of-state property owners don’t realize that the New Jersey exit tax applies to them. That’s why it’s critical to calculate your estimated gain and prepare for the potential withholding amount under the New Jersey exit tax rules.

Can You Get a Refund After Paying the New Jersey Exit Tax?

Yes, you can. The New Jersey exit tax is a withholding—not a final tax bill. If the amount withheld exceeds what you owe in state income tax, you can file a New Jersey income tax return and request a refund. At Garden State Cash Homes, we often advise clients to consult with a tax professional after closing to ensure they recover any excess payment made under the New Jersey exit tax.

Garden State Cash Homes Makes It Easy

At Garden State Cash Homes, we specialize in helping homeowners sell their properties fast and with minimal hassle, even if the New Jersey exit tax applies. Whether you’re selling a home due to relocation, financial hardship, or simply want a cash offer with no repairs or commissions, we handle the process from start to finish—including guidance on the New Jersey exit tax.

In Conclusion

The New Jersey exit tax is a critical factor to consider when selling your home, especially if you’re planning to move out of state. While it can seem like a burden, understanding how the New Jersey exit tax works can save you from unexpected costs and stress. With the right support and preparation, dealing with the New Jersey exit tax doesn’t have to be overwhelming. Contact Garden State Cash Homes today to learn how we can help you sell fast and navigate the New Jersey exit tax with confidence.