NJ Exit Tax and Mansion Tax in 2026: What Home Sellers Actually Pay

If you are selling a home in New Jersey, you have probably heard about the “exit tax.” The name is scary. It sounds like a penalty for leaving the state.

It is not. The NJ exit tax is a myth. There is no tax for moving out of New Jersey. What people call the exit tax is simply a prepayment of income tax you may already owe on your gain.

This guide explains what you actually pay when you sell a New Jersey property in 2026. That means the so-called exit tax, the mansion tax, and the Realty Transfer Fee. Every figure below is sourced to the IRS, the New Jersey statutes, or the N.J. Division of Taxation.

The “NJ exit tax” is really a prepayment

When a nonresident sells New Jersey real estate, the state collects an estimated income-tax payment at closing. This protects New Jersey’s ability to collect tax on the gain after you have moved away. It is not an extra tax.

Here is how the payment works. A nonresident seller pays the greater of:

• The reportable federal gain × 10.75% (New Jersey’s top Gross Income Tax rate), or
• 2% of the total sale price stated in the deed.

Even if there is no gain, the minimum payment is 2% of the price (N.J. Division of Taxation GIT/REP rules; N.J.S.A. 54A:8-9). The seller reports this on Form GIT/REP-1, the Nonresident Seller’s Tax Declaration, and pays at closing. The county will not record the deed without the form and the payment.

Who is exempt at closing

Most New Jersey residents selling their own home owe nothing extra at closing. The key is Form GIT/REP-3, the Seller’s Residency Certification/Exemption. A resident seller certifies the exemption on GIT/REP-3, and no estimated payment is withheld.

One common exemption is the principal residence. Under federal law (IRC Section 121), you can exclude gain when you sell your main home. The cap is $250,000 if you are single, or $500,000 if you are married filing jointly.

To qualify, you must have owned and used the home as your main residence for at least 2 of the last 5 years (IRS Topic 701). You generally cannot use the exclusion more than once every two years.

This exclusion is for your main home only. It does not apply to a rental or an investment property.

How to get the exit-tax money back

The estimated payment is a credit, not a final tax. After the sale, you file a New Jersey nonresident return (NJ-1040NR) for that year. You report your actual gain and apply the prepayment against the real tax.

If you overpaid, New Jersey refunds the difference. Overpayment is common. The 2% minimum often exceeds the real tax — especially when the gain is small or the Section 121 exclusion wipes most of it out. A quick CPA review before closing helps you avoid tying up more cash than you need to.

The mansion tax changed in 2025 — and the seller now pays

For years, the “mansion tax” was a flat 1% paid by the buyer on home sales over $1 million. That changed.

Effective July 10, 2025, New Jersey replaced it with a graduated supplemental fee paid by the seller (P.L.2025, c.69). Each rate applies to the entire sale price once the price crosses that line:

• 1% of the full price — over $1,000,000 up to $2,000,000
• 2% of the full price — over $2,000,000 up to $2,500,000
• 2.5% of the full price — over $2,500,000 up to $3,000,000
• 3% of the full price — over $3,000,000 up to $3,500,000
• 3.5% of the full price — over $3,500,000

These are cliffs, not brackets. A $2,000,000 sale owes 1%, or $20,000. A sale at $2,000,001 owes 2% of the whole price — about $40,000. Illustrative example — results vary.

Near a threshold line, the contract price itself becomes a planning point.

The fee applies to deeds for:

• Class 2 residential property
• Class 3A farm property with a residence
• Class 4A commercial property (other than industrial or apartment)
• Cooperative units

If you are selling a high-value home in a town like Short Hills, Alpine, or Saddle River, this is now a real seller cost. Plan for it before you sign.

The Realty Transfer Fee (almost every seller pays this)

Separate from the mansion tax, New Jersey charges a Realty Transfer Fee (RTF) on nearly every sale. The seller pays it at closing.

The RTF is charged in graduated brackets. It starts at about $2.00 per $500 — roughly 0.4% — on the first $150,000, then rises on higher amounts (N.J. Division of Taxation). Sales over $350,000 use a higher schedule.

Sellers 62 or older, blind, or disabled may qualify for a reduced rate on an owner-occupied one- or two-family home (N.J.S.A. 46:15-10.1). Qualifying low- and moderate-income housing gets a break too.

The RTF is easy to overlook until the closing statement arrives. On a typical Bergen County home, it is a real line item worth budgeting for.

Selling investment property? Consider a 1031 exchange

Selling a rental or investment property instead of your main home? You may be able to defer the federal gain through a Section 1031 like-kind exchange. You reinvest the proceeds into other business or investment real estate and postpone the tax (IRS, like-kind exchanges).

Two cautions apply. First, since 2018, Section 1031 covers only real property, not personal property. Second, the IRS timelines are strict — you have a limited window to identify and close on the replacement property. A 1031 does not erase the New Jersey estimated payment at closing. But planning the two together protects your cash. Our real estate investor accounting team coordinates both.

Moving to Florida, 1031 exchanges, and the GIT/REP-3 exemptions

Two situations raise the most exit-tax questions. The retiree who moves to Florida before closing, and the investor rolling a rental into a 1031 exchange. Here is how the GIT/REP rules treat each one.

Moving to Florida before you close

Say you settle into a Florida home in spring and close on the New Jersey house in August. By closing day, you are likely a nonresident seller. Nonresident sellers must file the estimated-tax declaration even when there is no gain (N.J.S.A. 54A:8-10).

The move does not create a new tax, though. The same statute lists closings where the prepayment rules do not apply:

• The property was used exclusively as your principal residence within the meaning of IRC Section 121
• The seller is a mortgagor in foreclosure, or is handing the lender a deed in lieu of foreclosure
• The seller is a government agency or a qualifying mortgage entity

So the home you lived in full-time can still escape the prepayment after you become a Florida resident. The exemption follows the property’s use, not your zip code on closing day.

Mixed use is the trap. Think of a two-family house where one unit was rented. You prepay estimated tax on the gain from the non-residence part (N.J.S.A. 54A:8-10(c)), while your own unit stays exempt.

Residency at closing turns on domicile and time spent in New Jersey — facts, not labels. The order of your move and your sale is a real planning choice. Our NJ tax planning team helps sellers map that timeline before the contract is signed.

What a 1031 exchange changes — and what it does not

On the federal side, a Section 1031 exchange defers your gain — it does not erase it. A few ground rules apply:

• Since 2018, Section 1031 covers real property only, not personal or intangible property
• Take cash or other non-like-kind property — called boot — and you recognize gain to that extent
• You report the exchange to the IRS on Form 8824, Like-Kind Exchanges
• U.S. real property is not like-kind to property outside the U.S.

On the New Jersey side, the path is narrower than most sellers expect. The statute measures the prepayment by your reportable federal gain, counted at no less than 2% of the sale price (N.J.S.A. 54A:8-9). And the statute’s exemption list has no 1031 entry.

In practice, the Division of Taxation handles qualifying nonrecognition exchanges through a certification on Form GIT/REP-3. That path is form-level practice, not a statutory right. Do not assume a zero payment is automatic — confirm the current GIT/REP-3 rules before you pick a closing date.

An exchange also touches your passive-loss history and real estate professional status. Our guide to real estate professional status for NJ rentals covers that side of the sale.

Weighing a Florida move or an exchange against a straight sale? That is a numbers question. Every closing is different, so book a pre-closing review before you sign.

Three mistakes NJ sellers make

• Treating the exit tax as money lost. It is a credit. File the NJ-1040NR and reconcile it against your real tax.
• Forgetting the mansion tax now hits the seller. On a $1.5 million sale, that is a five-figure cost you must plan for before closing.
• Missing the GIT/REP-3 exemption. A resident selling a principal residence should not have tax withheld — but only if the form is completed correctly.

How ProAxis helps New Jersey sellers

Selling New Jersey property has three moving parts: the estimated income-tax prepayment, the mansion tax, and the Realty Transfer Fee. Each is easy to get wrong. Owners in this situation often benefit from a short pre-closing review.

ProAxis is a licensed New Jersey CPA firm. We help sellers:

• Confirm the right GIT/REP form and avoid over-withholding at closing
• Apply the IRC Section 121 exclusion correctly on a principal residence
• Project the new graduated mansion tax on a high-value sale
• Coordinate a 1031 exchange on investment property
• Reconcile the prepayment on the NJ return and recover any refund

If you are planning a sale, explore our real estate tax planning services or schedule a free consultation. For an entity-owned rental, the NJ BAIT election may also lower your state tax bill. If a move out of state is part of a larger wealth-transfer plan, our estate and gift tax services can help you plan ahead. Comparing providers for investment property? See the best real estate CPA firms in NJ.

Frequently Asked Questions

Is the NJ exit tax a real tax?

No. The NJ exit tax is a myth. It is not an extra tax for leaving New Jersey. It is a prepayment of the Gross Income Tax you may owe on the gain from selling NJ property. You reconcile it on your New Jersey return, and any overpayment is refunded.

How much is the NJ exit tax when I sell my house?

For a nonresident seller, the estimated payment is the greater of two amounts. The first is your reportable federal gain multiplied by 10.75%, New Jersey’s top Gross Income Tax rate. The second is 2% of the total sale price stated in the deed. Even with no gain, the minimum is 2% of the price.

Who pays the NJ mansion tax in 2026?

Since July 10, 2025, the seller pays it — not the buyer. New Jersey replaced the old flat 1% buyer-paid mansion tax with a graduated supplemental fee on sales over $1 million. The rate runs from 1% up to 3.5% based on the price.

Is selling my primary residence in NJ exempt from the exit tax?

Often, yes. A New Jersey resident selling a principal residence certifies an exemption on Form GIT/REP-3, so no estimated payment is withheld at closing. The federal home-sale exclusion under IRC Section 121 can also exclude up to $250,000 of gain (single) or $500,000 (married filing jointly). To qualify, you must have owned and used the home for 2 of the last 5 years.

How do I get the NJ exit tax money back?

The estimated payment is a credit, not a final tax. You file a New Jersey nonresident return (NJ-1040NR) for the year of the sale, report the actual gain, and apply the prepayment. If you overpaid — which is common when the 2% minimum exceeds the real tax — New Jersey refunds the difference.

Does the NJ mansion tax apply to commercial property?

It can. The graduated supplemental fee applies when the sale price is over $1 million. Covered deeds include Class 2 residential property and Class 3A farm property with a residence. Class 4A commercial property (other than industrial or apartment) and cooperative units are covered too.

Do I pay the NJ exit tax if I move to Florida before selling my NJ home?

Moving first usually makes you a nonresident seller, so you file the nonresident tax declaration at closing. The prepayment does not apply if the home was used exclusively as your principal residence under IRC Section 121. You certify the exemption on Form GIT/REP-3. Any payment you do make is a credit on your New Jersey nonresident return — not money lost.

Does a 1031 exchange avoid the NJ exit tax at closing?

Not automatically. New Jersey ties the estimated payment to your reportable federal gain, which a full 1031 exchange defers. But the statute’s exemption list has no 1031 entry — relief runs through a Division of Taxation certification on Form GIT/REP-3. Cash boot creates reportable gain, so confirm the current form rules with a CPA before closing.

This article is general information for New Jersey property sellers. It is not tax advice and does not create a CPA-client relationship. Tax rules change and apply differently to each situation. Figures are current as of the date above and are sourced to the IRS, the New Jersey statutes, and the N.J. Division of Taxation. Confirm your specifics with a licensed CPA before you act.