There are major misconceptions about what is often referred to as the “NJ Exit Tax.” First of all, it is not a tax, it is a withholding. Just like your federal or state taxes are withheld from your pay check, this withholding is collected from closing proceeds. When you file your NJ Income Tax return, this prepaid amount will be used to offset any tax liability. If the sale transaction does not create a tax liability, the withholding will be refunded. The withholding is meant to ensure that a tax return is filed with the state of New Jersey following the sale of a property in New Jersey and that funds are available to make any payments required.
Second, the tax withholding is not for New Jersey residents or those moving out of state if the property being sold was primary residence. Other exemptions also exist, but the two previously mentioned are the most common. The exit tax is primarily intended for out-of-state residents who are selling vacation homes or investment properties in the state of New Jersey.
At Petriello Law, we have experience working with individuals selling their homes and moving out of state. We are happy to share our experience to help you as you prepare to sell your home. Reach out to our office today if you need an attorney related to a real estate transaction.