New Jersey's Stealth Sales Tax

Posted at 8:19 PM, Oct. 6, 2007

Many New Jersey homeowners are unaware of the fact that they have to pay a sales tax when they sell their home. Of course the state doesn't like to call it a tax. The official name of the tax is the Realty Transfer Fee. But, who are they fooling? It doesn't matter if you sell your home with a real estate agent or on your own. It's a state tax and you can't get around it. The amount of the sales tax is directly dependent on the sales price. The specific formula for calculating the tax is somewhat involved. But, to give you an idea of the size of the tax, a sales price of $350,000 will result in a tax bill of over $2,100. A $400,000 sales price results in a tax bill of over $3,200 and so on and so forth.

There are a couple of things that bother me about the tax. First and foremost many homeowners don't learn about the tax until after they sell their home. In extreme cases they don't find out about the tax until they're sitting down at the closing table. The politicians in Trenton know it's not a well known tax. Consequently, the tax has been raised several times since it was first imposed in 1968. More disturbing, state officials are considering legislation that will permit local municipalities to add their own "fee" on top of what the state is already charging. The New Jersey Association of Realtors^® has established a web site that provides additional information. There's also a petition to sign if you're so inclined. The web site is www.njhometax.com.

It doesn't take an economics major to understand that these insidious tax increases only serve to line the government coffers and are not in the best interest of the real estate market and general economy. Spread the word! The more people know about the RTF the less likely Trenton will act to raise the tax.