Thinking of leaving New Jersey and wondering about the so-called “exit tax”? You’re not alone—and the name itself is misleading. In this article, originally featured on NJMoneyHelp.com, Martin D. Hauptman, Partner in the Trusts & Estates and Tax Law Practice Groups at Mandelbaum Barrett PC, breaks down what the “exit tax” actually is, how it applies, and what you need to know when filing your 2024 tax return.
The “exit tax” isn’t a separate or additional tax. It’s actually a mandatory estimated tax payment required when selling real estate in New Jersey and establishing residency out of state. The goal is to ensure New Jersey collects capital gains taxes tied to the sale before the seller leaves the state.
If you sold your home in 2024 and are filing your state taxes this year, here’s what you need to know:
No Recent Changes to the Exit Tax Law
As of April 2025, no new legislation has altered New Jersey’s exit tax rules for individual taxpayers. Recent changes to state tax law—such as those involving zero-emission vehicle incentives and corporate business tax reforms—do not impact this requirement for individuals.
You’re a Part-Year Resident Now
If you moved out of New Jersey in 2024, you are considered a part-year resident. You’ll need to file Form NJ-1040NR, the New Jersey Nonresident Income Tax Return. This allows you to report:
- Income earned while you were still a resident, and
- Any income derived from New Jersey sources after your move.
How the Estimated Payment Works
At the time of closing on your New Jersey property, you were required to make an estimated tax payment—whichever is greater:
- 8.97% of the gain on the sale, or
- 2% of the total sale price
This payment is applied toward your total New Jersey tax liability. When you file your return, you’ll report the actual gain or loss from the sale. If the estimated payment exceeds your liability, you may be eligible for a refund.
Pro Tip: Speak to a tax advisor before listing your property if you plan to move out of state. Early planning can prevent headaches at tax time.
Need help navigating New Jersey tax filings or multi-state residency issues? Our Tax Law and Trusts & Estates teams are here to help. You can reach Martin at mhauptman@mblawfirm.com or call 973-243-7912.