New Jersey exit tax

[snopes]

Comment: there is this rumor that keeps circulating around Monmouth county
New Jersey, that when selling your house and relocating out of state, that
you have to pay a New Jersey Exit Tax - up to 1% of the sell price....what
is the real deal?

[DarkDan]

They're probably talking about the Realty Transfer Fee, which applies to moving out of state AND in state.

Dark "Welcome to Jersey! Now get out." Dan

I've been lurking on these boards for quite some time now, and this topic (and lack of response) is what's prompting me to finally make my first post.

I work for a real estate title insurance company in New Jersey, and I can verify this rumor is true - not just for Monmouth County, but all of New Jersey, and it's not the Realty Transfer Fee that's being referenced.

Several years ago, the State of New Jersey began requiring all property owners to execute a special tax form that must be attached to all deeds upon sale of the property, or the deed would be rejected by the recording office. There is the Seller's Residency Certification/Exemption (form GIT/REP3) for NJ resident taxpayers and contains eight exemption choices allowing for any taxes on the gain to be paid when filing NJ income taxes. Then there is the NonResident Seller's Tax Declaration (form GIT/REP1) for out-of-state residents who MUST pay a minimum 2% tax to NJ for the sale of any property. (Note that this 2% minimum is on the consideration listed on the deed - NOT 2% on the gain on the property. So if a Pennsylvania resident bought a summer property at the Shore for $100,000 in 1990 and sold it today for $500,000 he would be required to pay a minimum $10,000 tax to NJ at the time of the deed transfer (2% of $500,000) - the amount would not be calculated based on his $400,000 gain. He would have to file a non-resident tax return to recoup any amount overpaid, from what I understand of it.)

Now, up until earlier this year, many New Jerseyans selling their homes and moving permanently out of state were utilizing the GIT/REP3 (Resident) form, based on the assumption they would be filing New Jersey income taxes for that tax year and would pay the taxes (if any) on the sale of the property at that time. As of July 2007, they can no longer do so. The state Division of Taxation has "amended" their position that, in order to utilize the Resident form, the seller MUST be moving to a New Jersey address as of the date of deed transfer, or they must use the NonResident (GIT/REP1) form, thereby requiring them to pay the minimum 2% of the deed consideration directly to the state. I can only surmise that the sheer volume of residents fleeing to greener pastures - plus seeing an opportunity to further bloat the coffers - is what prompted NJ in its infinite wisdom to "clarify" their filing instructions

So, while it's not an "exit tax" per se, that is essentially what it has become - one last way for the Garden State to stick it to you on your way out the door.

Hope this sheds some light on the issue.

[Sara@home]

But is it truly an exit tax or just a way of assuring that the taxes due are paid? Aren't you saying that if the seller pays more with the 2% than he would owe by taxing the capital gains, he would get a refund? All he has to do is make sure he files his NJ1040-NR and he gets a refund.

There's a big difference between NJ assuring that the taxes are paid, as this sounds like it is, than putting an additional tax on people who leave the state.

Maryland retains part of the sale proceeds of properties owned by out-of-staters. It's withholding to be applied towards any capital gains. Any overpayment is refunded when the seller files a MW506NRS. Sounds like NJ does the same thing.

[Steve Eisenberg]

I thought this thread was going to be about the toll bridges over the Delaware and Hudson, most all of which only only charge you in the going-out-of-New-Jersey direction.

[keokuk]

Originally Posted by Steve Eisenberg

I thought this thread was going to be about the toll bridges over the Delaware and Hudson, most all of which only only charge you in the going-out-of-New-Jersey direction.

I think they do that for traffic purposes. They used to make people pay both ways, and then someone realized, "Wait a minute. If we only use tolls for outgoing bridges and tunnels, and do it for all outgoing bridges and tunnels, then we can just double the price and get rid of half the tolls."

[jayjaybear]

Originally Posted by Steve Eisenberg

I thought this thread was going to be about the toll bridges over the Delaware and Hudson, most all of which only only charge you in the going-out-of-New-Jersey direction.

No, that's just us Pennsylvanians trying to keep the riff-raff out...

[Der Jägermeister]

--->2% to leave New jersey? Yous guys are totally lowballing yourselves.