Box 1
NJ Resident Staying In-State
Seller is a NJ resident who will file NJ-1040. Based on the closing date. If you were a resident at closing, you can check this box even if you move out afterward.
NJ Exit Tax Explained
Selling your NJ home and moving out of state? New Jersey collects an estimated tax payment at closing. Understand the GIT/REP forms, calculate your withholding, know your exemptions, and plan your move to keep more of your equity.
The Five GIT/REP Forms
Every NJ real estate deed requires one of these forms. Filing the wrong form or missing it entirely will block your closing.
| Form | Who Files | Purpose | Payment? |
|---|---|---|---|
| GIT/REP-1 | Nonresident individual, estate, or trust | Tax declaration with estimated payment at closing | Yes |
| GIT/REP-2 | Nonresident seller pre-paying at Division office | Prepayment receipt with Division's raised seal | Yes (paid at RIC) |
| GIT/REP-3 | Seller claiming an exemption (16 boxes) | Residency certification or exemption claim | No |
| GIT/REP-4 | Buyer or seller in special situations | Waiver requiring Division approval and raised seal. Submit 14+ days before closing. | No |
| GIT/REP-4A | Current property owner | Corrective deed with no consideration (fixing deed errors) | No |
E-signatures are accepted on GIT/REP-1, GIT/REP-3, and GIT/REP-4A (P.L. 2021, c.179). GIT/REP-2 and GIT/REP-4 still require the Division's physical raised seal. Current form versions (8-24/8-25) must be used for deeds dated on or after September 1, 2024. The Division's authoritative guidance is Technical Bulletin TB-57(R), revised September 30, 2025.
How the Exit Tax Is Calculated
The estimated payment equals the greater of 10.75% of the gain or 2% of the total sale price. The 2% is a floor, not a cap.
The Formula
Estimated Payment = MAX( Gain × 10.75%, Sale Price × 2% )
“Consideration” includes the cash sale price plus the remaining mortgage balance, liens, encumbrances, and any non-cash compensation. The 10.75% rate is the highest GIT bracket under N.J.S.A. 54A:2-1 (enacted P.L. 2020, c.118 for income exceeding $1 million). Some older guides still cite 8.97%; that rate has been incorrect since tax year 2020.
Example 1: Primary Residence, Full Section 121 Exclusion
Married couple selling their NJ primary residence for $850,000 and moving to Florida. Cost basis: $400,000. Lived in the home 10+ years.
Sale price$850,000
Cost basis$400,000
Gross gain$450,000
Section 121 exclusion (MFJ)($500,000)
Taxable gain$0
Withholding at closing$0. File GIT/REP-3 Box 2
Example 2: Investment Property, Withholding vs. Actual Tax
Same couple sells an NJ investment property for $850,000 with $400,000 basis. No Section 121 exclusion applies. $450,000 is the only NJ-source income.
10.75% × $450,000 gain$48,375
2% × $850,000 sale price$17,000
Withholding at closing (higher amount)$48,375
But the actual NJ tax is much lower (graduated brackets, MFJ):
| Bracket | Rate | Tax |
|---|---|---|
| $0 to $20,000 | 1.4% | $280 |
| $20,001 to $50,000 | 1.75% | $525 |
| $50,001 to $70,000 | 2.45% | $490 |
| $70,001 to $80,000 | 3.5% | $350 |
| $80,001 to $150,000 | 5.525% | $3,868 |
| $150,001 to $450,000 | 6.37% | $19,110 |
| Actual NJ tax | ~$24,623 | |
Refund: ~$23,752. The withholding used the 10.75% top rate, but the actual tax is computed on graduated brackets. You recover the overpayment on your NJ-1040NR or via Form A-3128. The estimated payment is reported on the “Estimated Payment/Credit” line of the NJ-1040NR, not the “NJ Withholdings” line.
Example 3: Single Filer, Gain Exceeds Section 121 Exclusion
Single filer sells primary residence for $650,000 with $100,000 basis. Gain is $550,000, which exceeds the $250,000 single exclusion by $300,000. This is the most commonly mishandled scenario.
Step 1: Determine GIT/REP form at closing
Gross gain ($650,000 minus $100,000)$550,000
Section 121 exclusion (single)$250,000
Gain exceeds exclusion?Yes, by $300,000
Trap: Because the gain exceeds the exclusion, GIT/REP-3 Box 2 cannot be used. The seller must file GIT/REP-1 with the full withholding calculation on the entire $550,000 gain, not just the $300,000 excess.
Step 2: Calculate withholding at closing
10.75% × $550,000 gain$59,125
2% × $650,000 sale price$13,000
Withholding at closing (higher amount)$59,125
Step 3: Calculate actual NJ tax on NJ-1040NR (only $300,000 taxable after Section 121)
| Bracket | Rate | Tax |
|---|---|---|
| $0 to $20,000 | 1.4% | $280 |
| $20,001 to $35,000 | 1.75% | $263 |
| $35,001 to $40,000 | 3.5% | $175 |
| $40,001 to $75,000 | 5.525% | $1,934 |
| $75,001 to $300,000 | 6.37% | $14,333 |
| Actual NJ tax | ~$16,985 | |
Step 4: Filing sequence and refund
Withheld at closing$59,125
Actual NJ tax liability$16,985
Refund due~$42,140
File Form A-3128 immediately after recording for a 6 to 8 week refund. Then file NJ-1040NR for the tax year of the sale. The Section 121 exclusion reduces the taxable gain on the return, but cannot be applied on the GIT/REP-1 when the gain exceeds the exclusion limit.
2024 procedural option: Sellers with partial Section 121 gains can now check Box 2 on GIT/REP-3 and remit an estimated payment via NJ-1040-ES instead of the full 2% withholding at closing. This alternative avoids the massive over-withholding shown above. Consult your CPA before using this approach to confirm eligibility.
All 16 GIT/REP-3 Exemption Boxes
GIT/REP-3 contains 16 “Seller's Assurance” boxes. If you qualify for any of these, no estimated payment is required at closing. The form is filed with the county clerk, not sent to the Division of Taxation.
Box 2
Section 121 Primary Residence
Entire gain is excludable under the federal $250K (single) or $500K (MFJ) primary residence exclusion. Cannot be used if any portion of the gain exceeds the exclusion amount.
Box 3
Foreclosure Conveyance
Mortgagor conveying property to the mortgagee in a foreclosure proceeding where the seller receives no additional consideration beyond the mortgage balance.
Box 4
Government Agency or GSE
Seller or transferee is a federal or NJ government agency, FNMA (Fannie Mae), FHLMC (Freddie Mac), GNMA (Ginnie Mae), or a private mortgage insurance company.
Box 5
Entity Seller (Not Individual)
Seller is a corporation, partnership, LLC, business trust, or nonprofit organization. Entities are not subject to the individual GIT. Gain flows through to owners who must report it on their own returns.
Box 6
Consideration $1,000 or Less
Total consideration stated in the deed is $1,000 or less. Common for nominal transfers between related entities or corrective deeds with minimal value.
Boxes 7a/7b
Nonrecognition Transactions
Gain not recognized under IRC Section 721 (partnership contribution), Section 1031 (like-kind exchange), or Section 1033 (involuntary conversion). Box 7a for full nonrecognition; 7b for partial.
Box 8
Executor to Heir Distribution
Transfer by an executor or administrator to a devisee or heir to effect distribution of a decedent's estate. The transfer itself is exempt; the subsequent sale by the heir may not be.
Box 9
Short Sale (No Proceeds)
Short sale instituted by the mortgagee where the seller receives no proceeds from the transaction. The lender accepts less than the mortgage balance and the seller walks away with nothing.
Box 10
Deed Dated Before 8/1/2004
The deed was executed (dated) prior to August 1, 2004, and was not previously recorded. This grandfather provision covers deeds signed before the GIT/REP program took effect.
Box 11
Relocation Company
A relocation company acting as trustee purchases the property from the seller and resells it at the same price. The relocation company serves as an intermediary, not a principal.
Box 12
Transfer Between Spouses
Transfer between spouses or incident to divorce under IRC Section 1041. No withholding required regardless of consideration amount or residency status.
Box 13
Cemetery Plot
The property being transferred is a cemetery plot. This narrow exemption applies only to burial plots, not to properties adjacent to or associated with cemeteries.
Box 14
No Net Proceeds
Seller receives zero or negative net proceeds from the sale as shown on the settlement sheet. Common in short sales and underwater properties where the seller owes more than the home is worth.
Box 15
Retirement Trust
Seller is a retirement trust that has received an IRS acknowledgment letter. Qualified retirement plans (401(k), IRA trusts, pension trusts) are exempt from the GIT withholding.
Box 16
Active Duty Military
U.S. Armed Forces member selling NJ real property because of active duty deployment outside New Jersey. Must be selling due to deployment, not simply a service member selling for other reasons.
Transactions Requiring No GIT/REP Form at All
Certain conveyances fall outside the GIT/REP program entirely. No form is filed and no withholding is collected:
•Sheriff's deeds in foreclosure proceedings
•Bankruptcy trustee's deeds
•Master deeds (condominium declarations)
•Leases (regardless of term length)
•Deeds of easement
GIT/REP-4 Waiver: When No Exemption Box Fits
When none of the 16 GIT/REP-3 exemption boxes apply to your transaction, the GIT/REP-4 waiver provides an alternative path to avoid or reduce the withholding at closing.
When to Use GIT/REP-4
- •Sale at a capital loss where no other exemption applies
- •Bankruptcy trustee transfers
- •Court-ordered transfers (e.g., divorce where a spouse refuses to sign)
- •Ancient or unrecorded deeds
- •Unlocatable sellers
- •Undue hardship situations
Procedure and Timeline
- •Submit to the Regulatory Services Branch of the NJ Division of Taxation
- •Must be filed at least 14 days before closing
- •Requires supporting documentation (closing statement, purchase HUD-1, improvement receipts)
- •The Division issues the approved waiver with a raised seal
- •The waiver has an expiration date. If closing is delayed past that date, you must reapply
- •The Division will not grant a waiver simply because the seller prefers not to complete GIT/REP-3
Entity and Business Property Considerations
Business entities file GIT/REP-3 Box 5 and pay no withholding at closing. But the gain flows through to individual owners, and several traps catch unprepared sellers.
S-Corporation Sales
The S-corp files GIT/REP-3 Box 5 at closing. No withholding at that point. But the gain flows to shareholders on Schedule NJ-K-1 (Form CBT-100S). Nonresident shareholders who do not consent to NJ jurisdiction trigger a withholding obligation on the S-corp itself. The corporation must calculate and pay the shareholder's GIT at the highest rate using Schedule K of CBT-100S and report on Form NJ-1040-SC. Alternatively, nonresident shareholders may participate in a composite return (Form NJ-1080-C) under N.J.A.C. 18:35-5.2.
See our NJ S-Corp Election guide for more on NJ-specific S-corp requirements.
Partnerships and Multi-Member LLCs
Income flows to partners on Schedule NJK-1 (Form NJ-1065). Tax paid by the partnership on behalf of nonresident partners is reported on Line 52 of the NJ-1040NR through Part III of Schedule NJ-BUS-1. Partnerships may also file composite returns (Form NJ-1080-C) on behalf of nonresident partners to simplify compliance.
Single-Member LLC Trap
A single-member LLC taxed as a disregarded entity does NOT qualify for Box 5. The look-through rule treats the individual member as the seller. If the member is a nonresident, they must file GIT/REP-1 and pay the full withholding. This is one of the most common entity-level mistakes at NJ closings. Only multi-member LLCs, corporations, and partnerships qualify for the entity exemption.
Individual Owners Leasing to Their Business
When a business owner holds NJ real property personally and leases it to their operating entity, the individual is the seller, not the business. If the individual is a nonresident, they must file GIT/REP-1 and pay the full estimated withholding. The entity-level Box 5 exemption does not apply because the seller is an individual, regardless of how the property is used.
NJ Depreciation Decoupling and the Basis Trap
For rental and commercial property, NJ adjusted basis is often different from federal adjusted basis. Using the wrong basis on GIT/REP-1 will over-withhold at closing.
Why NJ Basis Differs From Federal
NJ does not conform to federal 100% bonus depreciation under IRC Section 168(k). Instead, NJ requires straight-line depreciation over the federal recovery period. NJ also caps the Section 179 deduction at $25,000, compared to the federal limit of $1,220,000 (2024).
The result: if you claimed bonus depreciation or large Section 179 deductions federally, your NJ adjusted basis is higher than your federal adjusted basis. A higher basis means a lower NJ gain. Using your federal basis on the GIT/REP-1 calculation will overstate the gain and inflate the withholding.
Form GIT-DEP is required to calculate the correct NJ depreciation adjustment. The difference between federal and NJ accumulated depreciation is added back to the NJ gain computation. S-corporation shareholders must also use NJ adjusted basis (which may differ from federal due to different treatment of S-corp income and losses), and partnership interests may require NJ adjusted basis per Tax Topic Bulletin GIT-9P.
Practical impact: A rental property with $200,000 of federal bonus depreciation and only $60,000 of NJ straight-line depreciation has a $140,000 basis difference. That means the NJ gain is $140,000 lower than the federal gain, and the withholding should be calculated on the smaller NJ gain. Get this wrong and your client overpays by $15,050 (10.75% of $140,000) at closing.
Bulk Sales Law and Buyer Liability
Commercial property transactions carry additional compliance requirements beyond the GIT/REP forms. Failure can make the buyer personally liable for the seller's outstanding NJ tax obligations.
Bulk Sales Law (N.J.S.A. 54:50-38)
For commercial property sales, the buyer must file Form C-9600 (Notification of Sale, Transfer, or Assignment in Bulk) at least 10 business days before closing. The Division assesses all outstanding state tax liabilities and issues an escrow letter.
One- or two-family residences owned by individuals, estates, or trusts are exempt. All commercial, multi-family (3+ units), industrial, and vacant commercial land require C-9600 compliance.
Buyer Liability
If the buyer fails to file C-9600, the buyer becomes personally liable for all of the seller's outstanding NJ tax obligations, including Corporate Business Tax, sales tax, and GIT. This liability is not limited to the purchase price.
Separately, under N.J.S.A. 54A:8-10, the buyer can be held liable for the seller's unremitted GIT if the deed is recorded without proper GIT/REP compliance. Buyers and their attorneys should verify GIT/REP compliance before closing, not after.
The Timing Strategy That Avoids Withholding
Per NJ Technical Bulletin TB-57(R), the residency determination is based on the date of closing. This creates a powerful planning opportunity.
Close Before You Move
If you sell the day before you move, you are a NJ resident at the time of closing. You file GIT/REP-3 Box 1, certify you will file a NJ-1040 as a resident, and pay $0 in estimated tax at closing. The underlying tax liability is unchanged: you still owe NJ tax on the gain. But you avoid the cash flow burden of withholding and the delay of waiting for a refund.
This is explicitly authorized by TB-57(R): “If the seller was a resident at the time of the closing, they can check this box even though subsequent to the recording of the deed by the county the seller becomes a nonresident.”
Buying Another NJ Home Simultaneously
If you sell one NJ property and buy another in NJ at the same time, you remain a NJ resident because you continue to maintain a permanent place of abode in the state. File GIT/REP-3 Box 1. No withholding is collected at closing.
Multi-State Filing After You Move
Your filing obligations depend on where you move. Here is how it works for the most common destinations.
Moving to a No-Tax State (FL, TX, NV, TN)
- •File part-year NJ-1040 for income during NJ residency
- •File NJ-1040NR for NJ-source income after the move (including property sale gain)
- •GIT/REP withholding is credited on Line 51 of NJ-1040NR
- •No credit mechanism in the new state; NJ tax is your total state tax cost
Moving to an Income-Tax State (NY, PA, CT, NC, SC)
- •File NJ-1040NR reporting NJ-source gain, credit GIT/REP withholding
- •File a resident return in the new state reporting worldwide income
- •New state typically allows a credit for taxes paid to NJ on the same income
- •NY: Form IT-112-R · CT: Schedule 2 · PA: Schedule G-L
- •The NJ-PA Reciprocal Agreement applies only to wages, not real property gains
Part-Year Income Allocation
Part-year residents must prorate all exemptions, deductions, credits, and exclusions based on the period of NJ residency. If a resident for 15 or more days of a month, that counts as a full month for proration purposes (per NJ Publication GIT-6).
Getting Your Refund
If the withholding exceeds your actual NJ tax (which it usually does for graduated-bracket taxpayers), here is how to get your money back.
Fast Track: Form A-3128
File immediately after the deed is recorded. No need to wait until year-end. Processes in 6 to 8 weeks. Does not eliminate the obligation to file NJ-1040NR.
Standard: NJ-1040NR
Claim the overpayment on your NJ nonresident return for the tax year of the sale. E-filed returns process in approximately 4 weeks. The estimated payment is reported on the “Estimated Payment/Credit” line, not the “NJ Withholdings” line.
Important: Per N.J.S.A. 54A:8-10(h), NJ does not pay interest on refunds of GIT/REP overpayments. The longer you wait to file, the longer NJ holds your money interest-free. File A-3128 the day the deed is recorded.
Common Mistakes That Cost You Money
These are the errors I see most often with NJ exit tax situations. Each one is avoidable with proper planning.
Filing no GIT/REP form at closing
The deed cannot be recorded without a GIT/REP form. The closing may proceed, but the title transfer is incomplete, creating legal chaos. Contact the GIT/REP Unit at (609) 322-9275 or Taxation.GITREP@treas.nj.gov at least two weeks before any complex closing.
Using GIT/REP-3 Box 2 when the gain exceeds the Section 121 exclusion
Box 2 requires the entire gain to be excludable. A single filer with a $300,000 gain cannot use Box 2 because $50,000 exceeds the $250,000 limit. They must file GIT/REP-1 with the full withholding on the entire gain, then reconcile on the NJ-1040NR.
Forgetting to file the NJ-1040NR after closing
The withholding is a prepayment, not a final settlement. Without the NJ-1040NR, no refund is issued and any underpayment remains unresolved. Many clients assume the withholding "settled" their NJ obligation. It did not.
Using federal basis instead of NJ basis for rental property
NJ does not conform to federal bonus depreciation under IRC Section 168(k) and caps Section 179 at $25,000. If you claimed bonus depreciation federally, your NJ basis is higher (less depreciation taken), meaning your NJ gain is lower. Use Form GIT-DEP to calculate the correct NJ basis.
Assuming single-member LLCs get the entity exemption
Disregarded-entity LLCs are looked through to the individual owner. If the owner is a nonresident, they must file GIT/REP-1 and pay the full withholding. Only multi-member LLCs, corporations, and partnerships qualify for Box 5.
Missing the installment sale 2% minimum
Even if you receive only a small down payment at closing, the 2% minimum is calculated on the full sale price. A $500,000 sale with $75,000 down still requires a $10,000 withholding at closing.
Not filing Form A-3128 promptly
NJ pays no interest on GIT/REP refunds. Every month you delay filing A-3128 is a month NJ holds your money at zero cost. File it the day the deed is recorded.
Skipping the Bulk Sales filing on commercial property
Buyers of commercial property who fail to file Form C-9600 at least 10 business days before closing become personally liable for all of the seller's outstanding NJ tax obligations under N.J.S.A. 54:50-38. This is the buyer's responsibility, not the seller's.
Planning Strategies
Legitimate ways to reduce or defer the NJ tax impact when selling property and leaving the state.
Close While Still a NJ Resident
File GIT/REP-3 Box 1 and skip the withholding entirely. You still owe NJ tax on any gain, but you pay it when you file your NJ-1040 instead of tying up cash at closing.
Maximize Your Cost Basis
Document all capital improvements: renovations, new roof, HVAC, landscaping. Closing costs at purchase (title insurance, attorney fees, transfer taxes) and real estate commissions at sale also increase basis and reduce taxable gain.
1031 Like-Kind Exchange
Defer both federal and NJ capital gains by exchanging into like-kind real property. The replacement property does not need to be in NJ. File GIT/REP-3 Box 7a if receiving only like-kind property. If the exchange is voided, the qualified intermediary must complete GIT/REP-1 and remit 2% of total consideration.
Installment Sale for Bracket Management
Spread gain recognition over multiple years to stay in lower NJ brackets. The 2% minimum is calculated on total consideration at closing regardless of down payment amount. For a $2M sale with a $200,000 down payment, the withholding is $40,000 (2% of $2M, since 2% of $2M exceeds 10.75% of a small recognized gain in year one). The 20% of cash received at closing is a common approximation, but the 2% of total consideration is the statutory floor.
Opportunity Zone Investment
NJ conforms to IRC Section 1400Z-2. Reinvest gains into a Qualified Opportunity Zone Fund within 180 days to defer NJ tax. The 10-year exclusion on QOZ investment gains remains available. Note the December 31, 2026 statutory cliff: the original deferred gain must be recognized by that date. The 5-year and 7-year basis step-ups have largely expired for new investments.
Charitable Remainder Trust (with Caution)
Contributing appreciated property to a CRT allows the trust to sell without immediate capital gains tax. However, NJ breaks from federal treatment per Technical Bulletin TB-64: a CRT is NOT tax-exempt for NJ GIT purposes and is treated as a taxable trust. Income distributions to NJ-resident beneficiaries are taxed as ordinary NJ income. Consult a CPA before using this strategy for NJ purposes.
Estates and Trusts
Estates and trusts follow specific GIT/REP rules that differ from individual sellers. The residency of the estate or trust determines the filing requirement.
Resident Estate or Trust
A NJ-resident estate or trust files GIT/REP-3 Box 1, certifying that a NJ fiduciary return (NJ-1041) will be filed. No withholding is collected at closing. An estate is generally considered a NJ resident if the decedent was domiciled in NJ at death. A trust is a NJ resident if the grantor was a NJ resident when the trust became irrevocable, or if the trust is a revocable grantor trust of a NJ resident.
Nonresident Estate or Trust
A nonresident estate or trust must file GIT/REP-1 with the full withholding payment. The gain is computed without reduction for any distribution of income to beneficiaries during the taxable year of the sale (N.J.S.A. 54A:8-9(c)). This means the withholding is calculated on the entire gain at the entity level, even if the gain will ultimately be distributed to and taxed at the beneficiary level.
Executor-to-heir transfers: The transfer of property from an executor or administrator to a devisee or heir to effect distribution of a decedent's estate is exempt under GIT/REP-3 Box 8. No withholding is required on the distribution itself. However, when the heir subsequently sells the property as a nonresident, the normal GIT/REP-1 withholding applies. The heir's basis is the fair market value at the date of the decedent's death (stepped-up basis under IRC Section 1014).
Recent NJ Tax Law Changes Affecting Real Estate
While the core exit tax framework under N.J.S.A. 54A:8-9 has remained unchanged since 2005, several recent NJ tax law changes affect real estate transactions and sellers leaving the state.
Mansion Tax Shift (P.L. 2025, c.69)
Effective July 10, 2025. Previously, the buyer paid a 1% Realty Transfer Fee surcharge on deeds exceeding $1 million. The new law shifts this obligation to the seller and introduces progressive scaling:
| Consideration | Seller Rate |
|---|---|
| Over $1,000,000 | 1% |
| Over $2,000,000 | 2% |
| Over $3,000,000 | 3% |
| Over $3,500,000 | 3.5% |
The mansion tax is a transfer fee, completely separate from the GIT/REP exit tax withholding. Both may apply to the same transaction. A seller of a $4 million home leaving NJ could owe the mansion tax (3.5% = $140,000) plus the GIT/REP withholding on any gain, plus standard Realty Transfer Fees.
QSBS Exclusion (P.L. 2025, c.67)
Effective January 1, 2026. NJ now conforms to the federal Qualified Small Business Stock (QSBS) exclusion under IRC Section 1202. Previously, NJ did not recognize the federal QSBS exclusion, meaning sellers of qualified small business stock paid NJ GIT on gains that were fully excluded federally. Starting in 2026, up to 100% of QSBS gain (subject to the greater of $10 million or 10x adjusted basis) can be excluded from NJ GIT. While this primarily affects stock sales rather than real estate, it is relevant for business owners who sell both QSBS and NJ real property in the same year, as it affects the overall NJ tax computation.
QOZ Deferral Cliff: December 31, 2026
All capital gains deferred into Qualified Opportunity Zone Funds must be recognized no later than December 31, 2026, regardless of whether the QOZ investment has been sold. The original 5-year (10% basis step-up) and 7-year (15% basis step-up) benefits have largely expired for new investments. The 10-year exclusion of gain on the QOZ investment itself remains available for investments held through 2026 and beyond. Sellers who deferred NJ real property gains into QOZ investments should plan for the 2026 recognition event.
Preparing for a NJ Residency Audit
NJ is among the most aggressive states for residency audits, ranked alongside New York, California, and Connecticut. IRS data shows NJ lost over $5.3 billion in AGI to outmigration in 2021 to 2022 alone, with cumulative losses of approximately $45.5 billion since 2004. United Van Lines has ranked NJ number one in outbound household moves nationally. The Division of Taxation actively targets departing high-income taxpayers.
What NJ Auditors Examine (the “Teddy Bear Test”)
NJ uses a totality-of-circumstances test. No single factor is determinative, but auditors are known for examining everything from where you keep your pets and family heirlooms to the location of valuable artwork and personal collections. This informal standard is sometimes called the “Teddy Bear Test”: where do you keep the things that matter most to you?
•Where you maintain a permanent home (most important factor)
•Where your spouse and dependents live
•Location of pets, art, heirlooms, and personal collections
•Driver's license and vehicle registration state
•Voter registration
•Federal return address
•Bank and brokerage account addresses
•Cell phone tower pings and location records
•E-Z Pass transaction history
•Credit card and debit card usage by location
•Airline ticket records
•Moving company manifests and receipts
•Medical and dental provider locations
•Religious and social organization memberships
•Professional affiliations and business connections
•Time spent in NJ (automated data matching)
Any portion of a day spent in NJ counts as a full day under the 183-day statutory residency rule, including brief stops for shopping, dining, or passing through Newark Airport. The taxpayer bears the burden of proving domicile change with “clear and convincing” evidence. The most common audit trigger is filing a nonresident return when you filed resident returns in prior years.
GIT/REP Unit Contact Information
For questions about GIT/REP forms, exemptions, or waiver applications, contact the NJ Division of Taxation directly. For complex closings, reach out at least two weeks before the scheduled closing date.
Phone
(609) 322-9275
Taxation.GITREP@treas.nj.gov
Guidance
TB-57(R), form versions 8-24/8-25
Tax Tips & Insights from Greg Monaco, CPA
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NJ Exit Tax FAQ
What is the NJ exit tax?
The NJ exit tax is not a separate tax. It is a mandatory estimated Gross Income Tax (GIT) prepayment collected at closing when a nonresident or departing resident sells NJ real property. The payment equals the greater of 10.75% of the estimated gain or 2% of the total sale price. It was enacted in 2004 under N.J.S.A. 54A:8-8 through 8-10.
What is the NJ exit tax rate?
There is no standalone 'exit tax rate.' The withholding uses the highest NJ Gross Income Tax rate, which is 10.75% (for income exceeding $1 million, enacted P.L. 2020, c.118). However, the actual NJ tax liability is computed on graduated brackets ranging from 1.4% to 10.75%. The 2% of total consideration serves as a minimum floor. Most sellers overpay at closing and receive a refund after filing their NJ return.
Do I have to pay the exit tax if I have no gain on the sale?
If you are a nonresident seller and do not qualify for an exemption, yes. The 2% minimum applies even when there is zero gain. For example, on a $500,000 sale with no profit, you would still owe $10,000 at closing. You can recover this overpayment by filing NJ-1040NR or Form A-3128 after closing.
Do I pay exit tax if I sell at a loss?
Yes, the 2% minimum withholding still applies at closing even if you sell at a loss, unless you qualify for a GIT/REP-3 exemption (such as Box 14 for zero or negative net proceeds). If the 2% would create a hardship, you can apply for a GIT/REP-4 waiver from the Division of Taxation by submitting documentation of the capital loss at least 14 days before closing. After closing, you recover the full overpayment on your NJ-1040NR.
How do I avoid the NJ exit tax?
The most effective strategy is to close the sale while you are still a NJ resident, even one day before your move. You file GIT/REP-3 checking Box 1, certifying you will file a NJ resident return. No estimated payment is collected at closing. The underlying tax liability is unchanged, but you avoid the withholding entirely.
Does the Section 121 exclusion apply to the NJ exit tax?
Yes. NJ fully conforms to IRC Section 121. If your entire gain is excludable under the $250,000 (single) or $500,000 (married filing jointly) exclusion, you file GIT/REP-3 checking Box 2 and owe $0 at closing. However, if any portion of the gain exceeds the exclusion, Box 2 cannot be used and you must file GIT/REP-1 with the full withholding calculation.
What happens if I don't file a GIT/REP form at closing?
The county clerk will refuse to record the deed. Under N.J.S.A. 54A:8-10(d), no deed can be recorded without the proper GIT/REP form and estimated payment. The sale can technically close, but the title transfer is incomplete, creating serious legal and practical problems for the buyer.
How do I get a refund of the NJ exit tax overpayment?
Two paths: File Form A-3128 (Claim for Refund of Estimated Gross Income Tax Payment) immediately after the deed is recorded for a refund in 6 to 8 weeks. Or claim the overpayment on your NJ-1040NR filed for the tax year of the sale, which processes in approximately 4 weeks for e-filed returns. Filing A-3128 does not eliminate the requirement to file the NJ-1040NR.
Does the exit tax apply if I sell through an LLC?
It depends on the LLC type. Multi-member LLCs and corporations file GIT/REP-3 checking Box 5 and pay no withholding at closing, because entities are not subject to the individual GIT. However, single-member LLCs treated as disregarded entities are looked through to the individual owner, who must file GIT/REP-1 and pay the full withholding if they are a nonresident.
What is the difference between GIT/REP-1 and GIT/REP-3?
GIT/REP-1 is filed by nonresident sellers who must make the estimated tax payment at closing. GIT/REP-3 is filed by sellers claiming an exemption from the payment, such as NJ residents staying in-state (Box 1), sellers whose entire gain is excluded under Section 121 (Box 2), or entity sellers (Box 5). No payment accompanies GIT/REP-3.
Can I do a 1031 exchange to avoid the NJ exit tax?
Yes. NJ fully conforms to IRC Section 1031. If you receive only like-kind property in the exchange, you file GIT/REP-3 checking Box 7a and no withholding is required. For partial exchanges where you receive boot (cash or non-like-kind property), you must either file GIT/REP-1 paying 2% on the non-exempt portion or make an estimated payment via NJ-1040-ES.
Can I avoid exit tax by selling to a family member?
No. The GIT/REP requirement applies to all conveyances of NJ real property, regardless of the relationship between buyer and seller. Selling to a family member at fair market value triggers the same withholding obligation. Transfers between spouses or incident to divorce are exempt under GIT/REP-3 Box 12 (IRC Section 1041), but other intra-family sales require the standard GIT/REP-1 filing and payment.
What happens if my closing is delayed and the GIT/REP-4 waiver expires?
GIT/REP-4 waivers are issued with a specific expiration date. If your closing is delayed beyond that date, the waiver is no longer valid and you must reapply to the Division of Taxation's Regulatory Services Branch. Plan for at least 14 days of processing time for the new waiver. Your closing cannot proceed with an expired waiver.
Does the exit tax apply to inherited property?
Yes. If you inherit NJ real property and sell it as a nonresident, the GIT/REP withholding applies. Your cost basis is the fair market value at the date of the decedent's death (stepped-up basis under IRC Section 1014). The gain is the difference between the sale price and that stepped-up basis. If the property was transferred from executor to heir, that transfer itself is exempt under GIT/REP-3 Box 8.
Is the NJ mansion tax the same as the exit tax?
No. The mansion tax (Realty Transfer Fee surcharge) and the exit tax are separate obligations. The exit tax is a GIT prepayment on capital gains. The mansion tax, restructured by P.L. 2025, c.69 (effective July 10, 2025), is a transfer fee paid by the seller on deeds exceeding $1 million, with rates scaling from 1% up to 3.5% for consideration exceeding $3.5 million. Both may apply to the same transaction.
What if I'm active duty military stationed outside NJ?
Active duty U.S. Armed Forces members selling NJ real property due to deployment outside NJ are exempt from the withholding requirement. File GIT/REP-3 checking Box 16. No estimated payment is required at closing. This exemption applies specifically to sales made because of active duty deployment.
Will NJ audit me after I move out of state?
Possibly. NJ is among the most aggressive states for residency audits, alongside New York, California, and Connecticut. The Division of Taxation uses automated data matching and can subpoena cell phone records, E-Z Pass data, credit card statements, and airline tickets to establish day counts. The burden of proof falls on the taxpayer. Document your domicile change thoroughly with updated driver's license, voter registration, vehicle registration, and bank addresses.
Selling Your NJ Home?
Whether you're moving to Florida, North Carolina, or anywhere else, the exit tax doesn't have to be a surprise. I'll identify the right GIT/REP form for your situation, calculate the actual withholding, verify your NJ adjusted basis for rental or commercial property, and make sure you're not overpaying at closing.
Already closed and need your refund? I'll file Form A-3128 and your NJ-1040NR to get your overpayment back as quickly as possible. Get in touch to discuss your exit tax situation.
Gregory Monaco, CPA LLC d/b/a Monaco CPA · NJ CPA Firm License #20CB00789800 · Personal License #20CC04711400
Livingston, NJ 07039 · (862) 320-9554 · taxhelp@MonacoCPA.CPA
NJ exit tax services are provided remotely to clients in New Jersey and other states where permitted. This page is for informational purposes only and does not constitute tax advice. Use of this website does not create a CPA-client relationship. IRS Circular 230 Notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.