Nonresident sellers who don’t qualify for an exemption in NJ are subject to an additional fee, paid during the closing or shortly before.
In New Jersey, there are many details involved in the sale of a house. These often less obvious procedures are essential for the transfer of property to be considered legal. Things get even more complicated when the seller of the home is not a New Jersey resident. Read on to learn more about requirements for a seller who is not a legal resident of the state and why it’s important to have a real estate lawyer on your side.
Selling or buying a home is a big decision that covers different fronts. We at Chamlin, Uliano & Walsh want to equip you with the information you need to make a wise decision and to know all of the costs and requirements that may be involved in completing your real estate transaction.
What is a Non-Resident Fee in New Jersey?
The primary additional step a person must undergo to close on the sale of a property in New Jersey when they are not a resident is pay a non-resident seller’s transfer fee, as well as submit its associated form with the New Jersey Division of Taxation. According to N.J.S.A. 54A:8-8 through 8-10, all non-residents must “pay estimated gross income tax in the amount of [at least] 2 percent of the consideration paid on their sale of real property in New Jersey.” This fee must be paid by the closing of the property. However, a seller can file for an exemption from this fee through Form GIT/REP-3, by which they may claim the Principal Residence Exclusion and have up to $250,000 of the property sale earnings deducted from their gross income for tax purposes.
What is an Estimated Gross Income Tax?
Gross income is the total amount of your earned and unearned income that is considered taxable by the Internal Revenue Service (IRS) and is not initially exempt from taxation according to the Internal Revenue Code. When a person sells a home in New Jersey, the sale obviously becomes part of the person’s gross income.
As part of the sale of a New Jersey home by a non-resident, the seller must pay an estimated gross income tax to the New Jersey Department of Taxation that is appropriate to the sale amount; NJ Rev Stat § 54A:8-10 through 8-10 note that that amount should be no less than 2 percent of the sale amount. NJ Rev Stat § 54A:2-1 (2016) specifies that “If the taxable income is:
- over $40,000.00, [the tax is] $542.50 plus 3.500% of the excess over $35,000.00;
- over $40,000.00 but not over $75,000.00, [the tax is] $717.50 plus 5.525% of the excess over $40,000.00;
- over $75,000.00 but not over $500,000.00, [the tax is] $2,651.25 plus 6.370% of the excess over $75,000.00; and
- over $500,000.00, [the tax is] $29,723.75 plus 8.970% of the excess over $500,000.00.”
How Do We Get a Transfer Fee That is Set Aside As a Non-Resident Fee?
A seller may prepay this non-resident transfer fee. To do so, they must file a Nonresident Seller’s Tax Prepayment Receipt, Form GIT/REP-2, as well as the NJ 1040ES Tax Form.
Can I get the Fee Back Entirely or in Part?
Can I get the Fee Back Entirely or in Part?This fee is considered a tax filing, and as such, the seller does not receive any part of the fee back unless they have overpaid the required state tax.
What Other Fees May I Be Subject to?
While there are a number of expenses that go into selling a home (i.e., preparing the house for sale, paying for a title search, submitting a courier fee if you have a mortgage, and paying a realty transfer fee, etc.), there are no other fees required for taxation purposes with the state of New Jersey.
Talk to one of our Rumson NJ Real Estate Attorneys to Craft an Action Plan for Selling your Home as an Out-of-State Resident
In New Jersey, it is not required to have a real estate attorney to represent you in the sale of your home. That said, the support of a real estate attorney is absolutely invaluable. In addition to helping you navigate the required non-resident seller’s transfer fees to ensure that you are legally squared away on your sale, our experienced real estate lawyers will represent you throughout the process of closing on your house and help you prepare the closing documents. We also may spare you a sour deal by ensuring that the buyer’s terms are in alignment with the worth of your home.
Are you selling your house in New Jersey and are not a resident of the state? We have years of experience supporting non-residents in obtaining the best deal on the sale of their homes and navigating the New Jersey taxation system. We help clients successfully sell their homes in Colts Neck, Middletown, Rumson, Point Pleasant, Little Silver, and across the Jersey Shore. At The Law Office of Chamlin, Uliano & Walsh, we know that the nitty-gritty details of getting a great deal on your house while abiding by New Jersey real estate and tax law can be daunting, and we’re here for you.
Contact us at 732-440-3950 or toll-free at 888-328-9131 for a consultation to navigate your particular options and the right road to follow.