What is the "NJ exit tax" and how do I handle it when I sell a property in New Jersey as a non-resident?
When you sell real estate in New Jersey as a non-resident, you're often required to pay an estimated tax at closing, commonly referred to as the "NJ exit tax." Officially, this process involves filing a GIT/REP form and prepaying part of your state income tax based on the sale.
Despite the nickname, the "exit tax" isn't a separate or additional tax. It’s a required estimated payment of New Jersey state income tax on any gain from the sale of real property located in NJ by someone who is not a state resident at the time of sale.
When you sell, the state wants to ensure it collects the proper tax on any potential gain. That means if you live out of state - even if you just moved a day before closing - you’re treated as a non-resident for this purpose.
By default, you're required to pay the greater of:
2% of the total sales price (often called the "2% NJ tax")
An estimated tax on the actual gain using NJ's highest income tax rate
In most cases, the 2% rule applies because it’s simpler to calculate at closing. Even if your actual profit is small or zero, the payment is still required unless you qualify for an exemption.
To complete the sale, you'll need to file one of the following GIT/REP forms:
GIT/REP-1: Used when you're making the required estimated tax payment at closing. This form must accompany the deed.
GIT/REP-2: Used if you prepay the tax separately before closing and bring a receipt to settlement.
GIT/REP-3: Filed if you qualify for an exemption, such as if the property was your primary residence and meets certain IRS rules (like the 2-out-of-5-year rule for gain exclusion).
Failure to submit the correct form and payment at closing can delay recording of the deed or cause post-closing issues.
Yes. After the sale, you'll file a New Jersey non-resident tax return (Form NJ-1040NR) to report the actual gain or loss. If the amount you prepaid at closing exceeds your actual NJ tax liability, you may be eligible for a refund.
Understanding the "sell a property tax" rules in New Jersey helps you prepare for closing without last-minute surprises. At The Jessica Lees Team, Serving the Wildwoods and Cape May County, NJ, we often help sellers navigate this exact situation. Whether it's advising you on the correct GIT/REP form or coordinating with your closing agent, our goal is to make your sale seamless and compliant.
If you’re selling New Jersey real estate and you no longer reside in the state, be prepared to deal with the so-called "2% tax in NJ." Know your GIT/REP form options, understand your tax liability, and work with a knowledgeable real estate professional who can help you navigate the details with confidence.
Before you list, let’s talk about how to prepare for the NJ exit tax and avoid surprises at closing. Call or text The Jessica Lees Team at 609-408-4656 to get started today. We serve sellers across the Wildwoods and Cape May County, NJ, with clarity and care every step of the way.
609-729-5108
5108 New Jersey Avenue, Wildwood New Jersey
