The reason for the exit tax is that people who moved out of New Jersey or those who never resided here would take their home sale gain and never pay the taxes owed, Kiely said. “The most common form that the non-resident seller must complete is form GIT/REP – 1. A non-resident individual, estate or trust is required to complete and sign the GIT/REP-1 or GIT/REP-2 form in order to record the deed, unless the non-resident individual, estate or trust meets one of the seller’s assurances listed on the GIT/REP-3 form, Papetti said. The exit tax is also imposed on green card holders who have held a green card for 8 out of the last 15 years (referred to as ‘long-term residents’). We would pay 2% * $250k, or $5k, as an estimated tax. So, do whatever you can do to avoid the exit tax. The "exit tax" is a capital gain tax; if he lost money on the house he should get it all back, but he needs to file a part-yeat NJ return for that year to do it. On June 29, 2004, New Jersey enacted P.L. This story was first posted in October 2015. 8: Transfer is by an executor/administrator of an estate pursuant to decedents Will. This can mean that green card holders who have not formerly surrendered the green card are ‘stuck’!!! The beauty of this strategy is that you can leave th… “Adjusted basis is tax speak for your home’s original cost, plus improvements made over the years,” he said. Email your questions to moc.p1610319598leHye1610319598noMJN1610319598@ksA1610319598. Our esteemed, former governor, Jim McGreevy came up with this gimmick. N.J.S.A. In New Jersey a capital gain is taxed the same as interest, dividends or wages,” he said. For more information on Pensions and Annuities, see NJ Income Tax – Retirement … The so-called exit tax isn’t really a different or extra tax. In order to even be subject to the IRS covered expatriate and exit tax rules, a person must be a U.S citizen or long-term legal permanent resident. This is called the Physical Presence test of the Foreign Earned Income Exclusion(FEIE). A trust established under the laws of New Jersey as more fully defined in N.J.S.A. You need to pay this tax when you move, rather than at the time you would normally file your state income tax return. For a New Yorker worth $100 million, being forced to pay a year or two of state income taxes after an audit is worth it to avoid the estate tax. A NJ person living in the state will pay a transfer tax when they sell, and I think that is regardless if you are moving out of state or will remain in the state. 4: Seller is a governmental agency. This form is then given to the buyer’s attorney or title agent along with the appropriate estimated tax payment.”. At the end of the day, the New Jersey “Exit Tax” is simply misunderstood as an additional or special tax, instead of the pre-payment of potential income tax due that it really is. “Since you do not owe this tax, you will entitled to a tax refund when you file your 2015 tax return.”. Take this money, and invest it in the new place! Delaying your move from New Jersey won’t necessarily help you avoid the exit tax. In other words, the State of New Jersey has established a “withholding” requirement to ensure collection of taxes owed by individuals who will not be residents of the State after the closing of title. “In many cases, the principal residence adjustment completely offsets the gain on the sale of your home.”. The 'exit tax' is actually income tax withholding for the potential income tax liability due to a possible capital gain. The estimated tax due is equal to the gain reportable for federal income tax purposes, if any, multiplied by the highest New Jersey tax rate for that year, Kiely said. So what does that mean? The treatment of the income upon withdrawal from the tax-deferred account depends on the type of account and when it's withdrawn and, other than the deferral period, might not result in any tax savings. The state wants to make sure that out-of-state home sellers pay what’s owed, and that they don’t skip out on paying taxes to the state if they move, relocate and never come back after the sale. A: New Jersey’s “exit tax” is something of a misnomer, and it certainly causes a lot of confusion among home sellers in the state. Your financial advisor Jersey and should not be less than 2 percent the. Tax on their resident NJ 1040 Gross income tax in New Jersey Part-Year resident how can i avoid paying nj exit tax non-resident tax,! 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