Do I Have to Pay Taxes When I Sell My House in NJ?
What taxes do I pay when I sell my house in NJ?
Most home sellers in NJ pay the state Realty Transfer Fee at closing (a sliding scale based on sale price), but many owe no income tax on the sale at all: the IRS lets you exclude up to $250,000 of gain ($500,000 for married couples) on a primary residence you've owned and lived in for 2 of the last 5 years. New Jersey also requires an estimated tax payment at closing from nonresident sellers (the 'exit tax'), which is reconciled on your return.
Selling a house in New Jersey raises a fair question: how much of the proceeds will taxes eat? For most homeowners the answer is “less than you fear” — but it pays to know the three things that can come up. (This is general information, not tax or legal advice — confirm your specifics with a professional.)
1. The NJ Realty Transfer Fee (RTF)
New Jersey charges a Realty Transfer Fee when a deed is recorded, and the seller normally pays it at closing. It’s calculated on a sliding scale based on the sale price, so a higher price means a higher fee. Some sellers qualify for reduced rates or exemptions — for example certain senior, blind, or disabled sellers, and some low- and moderate-income housing. Your closing attorney or title company calculates the exact amount.
2. The “exit tax” (nonresident withholding)
The so-called “exit tax” is not an extra tax — it’s an estimated Gross Income Tax payment that nonresident sellers must make at closing, generally the greater of 2% of the sale price or 10.75% of the gain. If you’ve already moved out of state, expect this to be collected at closing and then reconciled when you file your New Jersey return — if you overpaid, you get it back. New Jersey residents selling a primary residence generally don’t pay this at closing.
3. Federal capital-gains tax (and the big exclusion)
This is where most owners are pleasantly surprised. Under the IRS primary-residence exclusion, you can exclude:
- Up to $250,000 of gain if you’re single, or
- Up to $500,000 if you’re married filing jointly,
…as long as you owned and lived in the home as your main residence for at least 2 of the last 5 years. Only gain above the exclusion is potentially taxable. Investment properties and second homes don’t get this exclusion and may also involve depreciation recapture.
Inherited homes: the stepped-up basis
If you inherited the property, your cost basis is generally “stepped up” to the home’s fair-market value on the date of death. Sell shortly after, and the taxable gain is often minimal. Note that New Jersey repealed its estate tax for deaths after January 1, 2018, but still has an inheritance tax that depends on your relationship to the person who passed.
How a cash sale fits in
Selling to a cash buyer doesn’t change these tax rules — but it does eliminate the other costs that quietly shrink your proceeds: agent commissions, repairs, staging, and months of carrying costs. When you sell to Tom there are no commissions and no closing costs on your side, and we can walk you through what to expect at the closing table. For the tax treatment of your specific sale, talk with a CPA or tax attorney — and see our related guide on how cash offers are calculated.