Judging from the comments I've received lately, it seems time to revisit the issue of the New Jersey "Exit Tax," or as it is know to the State, The Gross Income Tax (GIT) Withholding on Real Estate.  First of all, some clarification about the panoply of taxes levied by New Jersey on the sale of real estate.

There are three taxes related directly to the sale of real estate in New Jersey.  There is the "mansion" tax, a 1% tax supposedly paid by the buyer of any property with a sale price over $1,000,000. 

The next tax is the Realty Transfer Fee (RTF).  It was established many years ago as a fee that was passed along to county clerk offices to fund the entry of data into local records.  It started out very modestly, but like the nose of the camel, no one really whacked it hard enough to keep the tax (or the camel) out, so it has now grown.  The camel is in the tent, and we are all suffering from its fleas.  The fleas (or fleece, if you please) amounts to nearly 1% of the sale price. Hmmmm.   I guess the mansion tax was established to make it possible for buyers to share the tax pain equitably with sellers.  The New Jersey Association of Realtors® has been working mightily to keep a lid on this tax and even to roll it back.  The lid is on, but the rollback seems unlikely.

Finally, there is the Gross Income Tax Withholding on Real Estate.  In its simplest form it requires an out-of-state seller (or one moving out of the state) to "make an estimated gross income tax payment on the gain from the sale or transfer of real property as a condition of recording the deed." (Public Law 2004, C. 55).  The key to computing this tax is a form called "Seller's Residency Certification/Exemption," know also as the GIT/REP-3.  There are 8 conditions on the form that get the seller off the hook.

The most significant one (for this market, at least) is number 7: "The gain from the sale will not be recognized for Federal income tax purposes under Internal Revenue Code Section 721, 1031, 1033...."  In other words, if a married couple has lived in the property as their primary residence for two of the past five years, property gain up to $500,000 does not incur tax.  If the Feds don't tax it, New Jersey won't.

That's it in a rather large nutshell.  However, I am not an attorney, nor an accountant - I don't even play one on TV.  For the final word on this anyone likely to be affected would do well to consult an tax attorney or accountant.

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If this entry is helpful, let me know.  I list and sell real estate for a living (for 30 years), and I would be pleased if you would consider me for your real estate sales or purchases.