Selling in New Jersey?

If you are an out of state resident selling a vacation home in New Jersey, you may owe state income tax on the profit.

In order to ensure payment of these taxes, the state has implemented new regulations that must be followed prior to settlement.

The buyer (or buyer’s agent) files a notice of the sale to the Division of Taxation.  Because the state does not know the specifics of the gain on the sale, it sends out a form letter stating a required escrow amount (6.97% of the selling price!).  The seller should then submit an Asset Transfer Tax Declaration (TTD form) which details the original price and improvements made over the years, along with settlement costs- all deductions off the selling price. 

These facts are reviewed, and a revised figure is provided by the state. 

Bottom line:  the State of New Jersey is collecting the income tax on the gain from the sale (current rate of 8.97%) at settlement.  The funds collected are “estimated payments” for that tax year.  The seller then files a New Jersey tax return to settle up.

Any good news?  Your home state will recognize the payment made to New Jersey- the gain is not taxed twice.

If you have any questions, I am happy to provide information from my experience.

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