Moving to a Different State to Save on Income Tax

Capital Gains = Selling Price − (Purchase Price + Improvements + Selling Costs)

Selling your home in New Jersey is a significant financial decision that involves navigating a complex landscape of taxes and fees. This guide aims to provide you with all the essential information, including capital gains tax, real estate transfer taxes, deductions, exemptions, and more.

Capital Gains Tax

What is Capital Gains Tax?

Capital gains tax is levied on the profit you make from selling your home. The profit is calculated as the selling price minus the original purchase price and any capital improvements made to the property.

Federal and State Rates

Both federal and state capital gains taxes may apply. Federal capital gains tax rates vary between 0%, 15%, and 20%, depending on your income. New Jersey's state capital gains tax rate is 8.97%.

Exemptions and Special Considerations

• Federal rules allow for an exemption on capital gains of up to $250,000 if you are a single filer and up to $500,000 if you are married filing jointly.
• You must have owned and lived in the home as your primary residence for at least two years within the five years prior to the sale to qualify for the federal exemption.
• Special considerations, such as selling a home you've lived in since 1992 or having sold multiple homes within a two-year period, could affect your tax liability.

Real Estate Transfer Taxes

Variable Tax Rate

New Jersey’s real estate transfer tax rate is variable, ranging from $2 to $6.05 for every $500 of a home's value, depending on the total value of the home being sold.

Taxation Tiers

• Homes at or under $150,000: $2.00 per every $500 of value
• Homes between $150,001 and $200,000: $3.35 per every $500 of value
• Homes between $200,001 and $350,000: $3.90 per every $500 of value