The New Jersey Realty Transfer Fee vs. the New Jersey Exit Tax
The New Jersey Realty Transfer Fee and the New Jersey Exit Tax are not the same thing. Many home sellers and even some agents and attorneys are confused by the New Jersey Realty Transfer Fee and the New Jersey Exit tax.
The New Jersey Realty Transfer Fee is not an exit tax. It is a fee charged to all sellers of properties in New Jersey. The funds from the Realty Transfer Fee are shared between the state and the counties. The state portion of the revenue is allocated to neighborhood revitalization, shore protection and the state's general fund. The counties are responsible for disbursement of their portion of the revenue.
The seller is responsible for paying the New Jersey Realty Transfer Fee and how much the seller pays is based on the property’s sales price and is paid at the time of closing. The higher the sales price, the larger the transfer fee and if the home is sold for over $1 million, the buyer is also responsible for paying 1% of the Realty Transfer Fee a/k/a "the Mansion Tax". Estimate your New Jersey Realty Transfer Fee using this online realty transfer fee calculator.
The New Jersey Exit Tax is different from the New Jersey Realty Transfer Fee because the Exit Tax is an estimated tax payment required to be paid from out of state sellers when they sell a property they own in New Jersey. Nonresident individuals, estates, or trusts that sell or transfer real property in New Jersey are required to make an estimated gross income tax payment prior to the recording of the deed and must be paid to the Division of Taxation before or at closing.
So who is considered a resident taxpayer? A resident taxpayer is one of the following:
■An Individual who is and intends to continue to maintain a permanent place of abode (home, residence) in New Jersey on/after the day of transfer.
■An Estate established under the laws of New Jersey.
■A Trust established under the laws of New Jersey.
A nonresident is any taxpayer who does not meet the definition of a resident taxpayer stated above. The estimated tax payment or New Jersey Exit Tax amount is equal to the highest rate of tax in New Jersey in the year of sale multiplied by the gain on the sale but not less than 2% of the sales price. The purpose of the exit tax is to ensure New Jersey gets paid. When the nonresident seller files their nonresident New Jersey tax return, if there's a difference between what is owed and what was paid, they'll be refunded.
The New Jersey Exit Tax applies only to nonresidents whereas the New Jersey Realty Transfer Fee applies to all properties sold in New Jersey. The New Jersey Realty Transfer Fee and New Jersey Exit Tax have nothing to do with whether you sell your home through a real estate agent or as a For Sale by Owner.
(**Certain or special exemptions, partial exemptions and/or circumstance may apply for the New Jersey Realty Transfer Fee and/or the New Jersey Exit Tax. I am not a financial professional and strongly recommend contacting a financial professional and/or accountant for further advice**)
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