NJ Exit Tax Explained: What It Is and How to Prepare

The NJ "exit tax" is one of the most misunderstood aspects of selling a New Jersey home and moving to Florida. Many sellers hear the term and assume it is a punitive tax on leaving the state. The reality is more nuanced, and understanding it can save you from an unwelcome surprise at the closing table.

What Is the NJ Exit Tax?

The "exit tax" is not actually a separate tax. It is a withholding requirement under the New Jersey Gross Income Tax Act. When a non-resident sells New Jersey real estate, the state requires a withholding of 2.275% of the total sale price to be remitted to the New Jersey Division of Taxation at closing.

The key detail that catches most sellers: the withholding is based on the full sale price, not just your profit. Even if you owe no capital gains tax, the state still withholds the money upfront.

When Does It Apply?

The withholding applies when you are a non-resident of New Jersey selling property in the state. If you have already moved to Florida before selling your NJ home, you are considered a non-resident and the withholding applies.

If you sell your NJ home while still living in it and move to Florida after the sale, you may qualify as a resident at the time of sale. In that case, the standard capital gains tax rules apply through your regular NJ tax return, without the upfront withholding.

The key factor is your residency status on the date of closing. Work with your tax advisor to understand your specific situation.

How to Minimize the Impact

While you cannot avoid the withholding if you are a non-resident seller, there are ways to plan for it and minimize the cash flow impact.

• Plan ahead financially. Know that roughly 2.275% of your sale price will be held at closing. Factor this into your moving budget and Florida down payment funds.
• Apply for a waiver. If you will owe less than the amount being withheld, you can file Form GIT/REP-1 (Certificate of Amount Due) with the NJ Division of Taxation before closing. If approved, the withholding is reduced to your actual estimated tax liability.
• Work with a tax professional. A CPA familiar with NJ and FL tax issues can help you navigate the waiver process and ensure you file correctly for a refund of any overpayment.
• Time the sale strategically. If possible, sell your NJ home as a resident before you officially change your domicile to Florida. This avoids the withholding entirely.

How We Help

As part of our relocation services, we walk every client through the NJ exit tax process. We make sure you know what to expect at closing, and we connect you with tax professionals who specialize in NJ to FL moves. You are never navigating this alone.

Related reading: NJ vs FL Property Taxes · Cost of Living Comparison · Tax Guide