By Hazel Secco, CFP®, CDFA®
In this guide
- What is the NJ exit tax?
- Who has to pay the exit tax at closing?
- How does New Jersey tax capital gains in 2026?
- What is the NJ mansion tax for sellers?
- A worked example
- Does moving out of New Jersey change taxes on your other investments?
- What to Do This Week
- Frequently Asked Questions
- Planning a sale or a move in the next few years?
If you’re planning to sell a New Jersey home and move to Florida, North Carolina, or anywhere with a lower tax bill, you’ve probably heard about the NJ exit tax. The name suggests New Jersey charges you for leaving. It doesn’t. What the state does is collect an estimated income tax payment at closing from sellers who are no longer New Jersey residents.
That payment can be large, and the rules around it decide how much cash you walk away with on closing day. Add New Jersey’s treatment of capital gains, which taxes them like a paycheck, and the 2025 change that moved the “mansion tax” onto sellers, and a home sale in New Jersey needs more planning than most people expect.
This guide explains what the NJ exit tax really is, who pays it, how New Jersey taxes capital gains in 2026, and what changes if you move before you sell.
What is the NJ exit tax?
The NJ exit tax is an estimated gross income tax payment that nonresident sellers of New Jersey real estate must make at or before closing. It equals the gain on the sale times New Jersey’s highest income tax rate, 10.75%, but never less than 2% of the sale price. It’s a prepayment of income tax, not an extra tax.
The rule comes from N.J.S.A. 54A:8-8 through 8-10. A nonresident seller files Form GIT/REP-1 with the deed, and the county won’t record the deed without either that payment or a valid exemption. The gain used is the gain you’d report for federal income tax purposes.
Because it’s an estimate, the final number is settled later. You file a New Jersey nonresident return (NJ-1040NR) for the year of the sale, report the actual gain, and claim the closing payment as tax already paid. If the payment was more than you owe, the difference comes back as a refund. If it was less, you pay the balance.
| What you’re selling | Who you are at closing | What happens at closing |
|---|---|---|
| NJ real estate | NJ resident | Sign GIT/REP-3 certifying residency, no payment at closing |
| NJ real estate | Nonresident, with an exemption that applies | Sign GIT/REP-3 claiming the exemption, no payment at closing |
| NJ real estate | Nonresident, no exemption | GIT/REP-1 and a payment of the greater of 10.75% of the gain or 2% of the price |
From NJ Division of Taxation Technical Bulletin TB-57(R) and the GIT/REP forms.
Who has to pay the exit tax at closing?
You pay it if you’re a nonresident individual, estate, or trust selling New Jersey real property and no exemption on Form GIT/REP-3 applies. If you’re still a New Jersey resident on the closing date, you certify that on GIT/REP-3 and no estimated payment is due at closing. You report the gain on your regular NJ-1040 instead.
GIT/REP-3 lists several exemptions. The one most sellers care about covers the sale of a principal residence that qualifies for the federal home sale exclusion. Others cover situations like a sale with no net proceeds. Your closing attorney will check which, if any, applies.
The 2% floor is the part that surprises people. It applies even if you sell at a loss, unless an exemption applies. On a $1,500,000 sale with no gain, a nonresident without an exemption still pays $30,000 at closing and waits for the refund.
How does New Jersey tax capital gains in 2026?
New Jersey taxes capital gains as ordinary income, at the same rates as wages, from 1.4% up to 10.75%. There’s no lower rate for long-term gains. A gain on stock you’ve held for 20 years is taxed the same way as a bonus.
For married couples filing jointly, the top brackets are where large gains land.
| NJ taxable income, married filing jointly (2026) | Rate on income in this band |
|---|---|
| $150,001 to $500,000 | 6.37% |
| $500,001 to $1,000,000 | 8.97% |
| Over $1,000,000 | 10.75% |
From the NJ Division of Taxation tax rate schedules. Single filers reach the same 8.97% and 10.75% bands at the same income levels.
Two more New Jersey rules change the math.
Capital losses only offset gains in the same year. New Jersey groups income into categories, and a loss in one category can’t reduce income in another. Capital losses can offset capital gains from the same tax year, but a net loss can’t reduce your wages or pension, and it can’t be carried forward. A loss harvested in December helps only if you have gains that year.
The home sale exclusion follows federal law. If you qualify for the federal exclusion on your principal residence (up to $250,000 of gain for a single filer or $500,000 for a married couple filing jointly), New Jersey allows the same exclusion. You have to take the exclusion on your federal return to take it on your New Jersey return.
What is the NJ mansion tax for sellers?
Since July 10, 2025, sellers of New Jersey real property for more than $1 million pay what the state now calls the Graduated Percent Fee, long known as the mansion tax. Before that date, buyers paid a flat 1%. The law shifted it to sellers and raised the rate for higher prices.
| Sale price | Graduated Percent Fee (paid by the seller) |
|---|---|
| Over $1,000,000 to $2,000,000 | 1% |
| Over $2,000,000 to $2,500,000 | 2% |
| Over $2,500,000 to $3,000,000 | 2.5% |
| Over $3,000,000 to $3,500,000 | 3% |
| Over $3,500,000 | 3.5% |
P.L. 2025, c. 69, effective for deeds recorded on or after July 10, 2025.
The rate applies to the whole price, not just the part above each threshold. A $2,400,000 sale pays 2% on the full $2,400,000, which is $48,000. This fee is separate from the regular realty transfer fee, which sellers already paid and still do. Neither is an income tax, so neither counts toward the income tax you settle on your return.
A worked example
This is a hypothetical composite, not a real client. A married couple bought their home for $900,000, including improvements, and sell it for $2,400,000. They’ve lived there for decades, so they qualify for the $500,000 federal exclusion.
| Amount | |
|---|---|
| Sale price | $2,400,000 |
| Adjusted basis | $900,000 |
| Gain | $1,500,000 |
| Federal (and NJ) home sale exclusion | $500,000 |
| Taxable gain | $1,000,000 |
| Graduated Percent Fee (2% of price) | $48,000 |
If they sell while still New Jersey residents, they sign GIT/REP-3 at closing and make no estimated payment. With $150,000 of other taxable income, the $1,000,000 gain adds about $83,300 to their New Jersey income tax for the year, because most of it is taxed at 8.97% and 10.75%.
If they move to Florida first and sell as nonresidents, the estimated payment is calculated on the federal reportable gain. Here that’s $1,000,000 × 10.75%, or $107,500, which is more than the 2% floor of $48,000. Whether an exemption on GIT/REP-3 changes that depends on their facts, so the closing attorney’s review matters. Either way, the gain on New Jersey real estate is New Jersey income, so moving first doesn’t remove the New Jersey tax on the house. It mainly changes when the money is paid and how much is held until the nonresident return is filed.
Does moving out of New Jersey change taxes on your other investments?
Yes, for income received after you change your domicile. In the year you move, you file a part-year resident return for the months you lived in New Jersey, and New Jersey taxes your income from all sources for that period. After the move, as a nonresident, New Jersey taxes only income from New Jersey sources, such as NJ wages or a gain on NJ real estate.
That’s why the timing of other large gains matters. Selling a concentrated stock position or a fund with large gains in March, while you’re still a resident, is taxed by New Jersey. Once you’ve truly moved, New Jersey doesn’t tax gains on the stocks, bonds, and funds you hold as personal investments. Stock compensation is different. RSUs and options tied to work you did in New Jersey may still be taxed there, so review them with your CPA before you count on the move.
Domicile is your permanent home, the place you intend to return to. Moving your belongings isn’t enough on its own. The Division of Taxation looks at factors such as where your bank accounts are, the address on your federal return, and whether you still take part in a New Jersey property tax relief program. Keeping a New Jersey home and spending more than 183 days a year here can still make you a New Jersey resident for tax purposes.
What to Do This Week
Find your basis. Pull the closing statement from your purchase and a list of improvements with receipts. Basis is what turns a scary gain into the real one, and it’s what any refund claim will rest on.
Decide the order of the move and the sale. Talk with your closing attorney about whether you’ll be a resident or nonresident on closing day, and whether a GIT/REP-3 exemption applies.
Price the Graduated Percent Fee. If your sale price is above $1 million, add the fee to your net proceeds estimate. Above $2 million, the rate jumps in steps.
Line up other large gains. If you plan to sell appreciated investments, look at whether they fall before or after your change of domicile and how they stack on top of the home sale gain.
Plan for the cash timing. If you’ll sell as a nonresident, assume the estimated payment comes out at closing and the refund, if any, arrives after you file the following year.
If you live in New Jersey, our other guides cover how the NJ retirement income exclusion works, how your NJ pension is calculated, and NJ inheritance tax.
Frequently Asked Questions
Is there an exit tax in New Jersey?
Not as a separate tax. The “exit tax” is an estimated income tax payment New Jersey requires from nonresident sellers of NJ real estate at closing. It equals the gain times 10.75%, with a minimum of 2% of the sale price. You settle the actual tax on a nonresident return and get a refund if you overpaid.
How can I avoid the NJ exit tax?
You can’t avoid New Jersey tax on a gain from New Jersey real estate, but you may avoid the closing prepayment. Sellers who are NJ residents on the closing date certify that on Form GIT/REP-3 and pay no estimate at closing. Nonresidents may also qualify for an exemption on GIT/REP-3, such as one for a principal residence.
What is the capital gains tax rate in New Jersey?
New Jersey taxes capital gains as ordinary income, at rates from 1.4% to 10.75% in 2026. There’s no lower rate for long-term gains. For married couples filing jointly, income from $500,001 to $1,000,000 is taxed at 8.97%, and income over $1,000,000 at 10.75%.
Does New Jersey tax the sale of a primary residence?
Only the gain above the home sale exclusion. New Jersey follows the federal rule, which excludes up to $250,000 of gain for a single filer or $500,000 for a married couple filing jointly, if you meet the ownership and use tests. Any gain above that is taxed as ordinary income in New Jersey.
Who pays the mansion tax in New Jersey now?
The seller. For deeds recorded on or after July 10, 2025, the Graduated Percent Fee on sales over $1 million is paid by the seller, at 1% up to $2 million and rising to 3.5% above $3.5 million. Before that date, the buyer paid a flat 1%.
Start with the Playbook
The biggest tax decisions around a move happen before you list the house, including the order of the sale, the move, and any other large gains. The Retirement Tax Playbook covers the moves worth making first. If you’re weighing staying versus leaving, our comparison of retiring in a high-tax state shows what New Jersey costs at different portfolio sizes, and the NJ retirement income exclusion covers what you’d give up by leaving.
Planning a sale or a move in the next few years?
The sale, the move, and the rest of your tax picture all affect each other. Book a 15-minute Align Call to talk through your timing, or read more about how we work as a financial advisor in New Jersey. Whether we work together or not, you’ll walk away with clarity on your best next step.
Hazel Secco, CFP®, CDFA®, is a fiduciary financial advisor and founder of Align Financial Solutions in Hoboken, New Jersey. She helps individuals and couples make informed decisions about retirement, investments, and taxes so their money supports the life they want. Align is based in Hoboken, NJ, but we work with clients across the country virtually.
Disclaimer. Advisory services are offered through Align Financial Solutions LLC, an investment adviser in the State of New Jersey. Align Financial Solutions does not provide tax or legal advice. This article is for educational purposes only and is not personalized investment, tax, or legal advice. Figures are current for 2026 and subject to change. All scenarios are hypothetical composites. Consult your CPA and closing attorney about your own sale.
Sources
- NJ Division of Taxation, Technical Bulletin TB-57(R), Gross Income Tax Requirements for Sellers and Transferors of Real Property. https://www.nj.gov/treasury/taxation/pdf/pubs/tb/tb57r.pdf
- NJ Division of Taxation, Estimated Gross Income Tax Payment Requirement for Nonresident Sellers of Real Property. https://nj.gov/treasury/taxation/individuals/nonsellers-property.shtml
- NJ Division of Taxation, Realty Transfer Fee and GIT/REP forms. https://www.nj.gov/treasury/taxation/realtytransfees.shtml
- NJ Division of Taxation, Form GIT/REP-1, Nonresident Seller’s Tax Declaration. https://www.nj.gov/treasury/taxation/pdf/other_forms/tgi-ee/gitrep1.pdf
- NJ Division of Taxation, New Jersey Tax Rate Schedules. https://www.nj.gov/treasury/taxation/pdf/current/njtaxratesch.pdf
- NJ Division of Taxation, Capital Gains. https://nj.gov/treasury/taxation/njit9.shtml
- NJ Division of Taxation, Sale of a Residence. https://www.nj.gov/treasury/taxation/njit10.shtml
- N.J.A.C. 18:35-2.4, Election to exclude gain on sale of principal residence. https://regulations.justia.com/states/new-jersey/title-18/chapter-35/subchapter-2/section-18-35-2-4
- NJ Department of the Treasury, Realty Transfer Fee Statistical Report (Graduated Percent Fee). https://nj.gov/treasury/economics/documents/pdf/stats/RTF-Statistical-Report.pdf
- NJ Division of Taxation, GIT-6, Part-Year Residents and Nonresidents. https://nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git6.pdf
- NJ Division of Taxation, Part-Year Residents. https://nj.gov/treasury/taxation/njit26.shtml
- N.J.S.A. 54A:5-8, Income from sources within State for nonresident. https://law.justia.com/codes/new-jersey/title-54a/section-54a-5-8/