The New Jersey exit tax on your capital gain when leaving New Jersey.

Think of a paycheck. Your employer sends state income tax in every period, and you settle up when you file. New Jersey applies that idea to people who sell property and leave the state.

The reasoning is practical. Once you move out of state, the State of New Jersey has no withholding agent and no easy way to collect, so it takes a prepayment while the deed is still in its hands.

An NJ resident selling the same home owes the same state tax on the same gain on the sale. That seller simply pays it in April.

This is the most repeated wrong answer online, and it appears in the top-voted explanations on Reddit and in plenty of realtor blogs.

Those answers describe Section 1034, which let sellers roll a gain into a more expensive home. Congress repealed it in the Taxpayer Relief Act of 1997.

Section 121 replaced it. A married couple filing jointly excludes up to $500,000 of capital gain, and a single filer $250,000, after owning and living in the property as a primary residence for two of the last five years. Price of the next house is irrelevant.

Run both numbers and use the larger. The 2% floor is what catches people, because it applies whether or not there is much of a taxable gain.

Rows one and three are the problem cases. A modest gain on an expensive property means the floor decides the number, and the state holds far more than the tax due.

A county clerk cannot accept a deed for recording without the right GIT/REP form attached. That rule is what turns this into a closing deadline.

An individual, estate or trust that is not a resident of New Jersey files the GIT/REP-1 with the estimated tax payment. A resident of New Jersey, or anyone who qualifies for an exemption, files the GIT/REP-3 instead and pays nothing at the time of closing.

Picking the wrong tax form is a common way to lose a closing date. Which GIT/REP form applies to your sale.

The GIT/REP-3 carries sixteen boxes. Check one that fits and no money changes hands. The common ones:

• You were still an NJ resident on the day of closing.
• The property being sold was your primary residence and qualifies under Section 121.
• The seller is a corporation, partnership, or LLC rather than an individual, estate or trust.
• The property is part of a 1031 exchange, using Box 7a or 7b.
• Total consideration is $1,000 or less, or no proceeds are due to the seller.
• The buyer is a government body.

Two more that almost nobody lists. A sheriff's deed in a foreclosure needs no GIT/REP form and no payment, and neither does a bankruptcy trustee's deed.

Two routes exist, and they differ mainly on timing.

Form A-3128 goes to the Division's Taxpayer Accounting Branch and can recover the overpayment before year end. Waiting and filing an income tax return instead means the refund arrives with your NJ-1040NR.

One trap. The GIT/REP-4 waiver only works before the deed records. Afterward a waiver request is rejected and A-3128 becomes the only path.

New Jersey has no part-year resident return, which surprises almost everyone who moves in July.

A part-year resident files an NJ-1040 covering the months of residency, plus an NJ-1040NR for New Jersey source income after the move. Sell the house after the move and the sale lands on the non-resident return, with the closing withholding credited against it.

Report that payment on the estimated payment line rather than as tax withheld. Putting it in the wrong box delays the refund by months.

New Jersey's graduated percent fee, which everyone calls the mansion tax, changed on July 10, 2025. It used to sit on the buyer at a flat 1%. Under P.L. 2025, c. 69 the seller pays it, and the rate climbs with the price.

On a $2.6 million sale that is $65,000 of additional tax, on top of the ordinary realty transfer fee and anything withheld under the GIT/REP rules.

Most articles on this topic are written for a retiree moving to Florida. Real estate investing runs into the same rules on every sale, and harder.

No primary residence exclusion applies to a rental. Depreciation lowers your basis, so the taxable gain exceeds the price difference. New Jersey taxes it as ordinary income with no long-term break, and allows no loss carryforward.

Simon Klein has worked with more than 250 real estate investors, and this is a conversation worth having before you sign. As your tax advisor he models the withholding, checks whether a 1031 exchange changes the answer, and handles the paperwork with your closing attorney.