NJ Exit Tax 2026: The 2% or 10.75% Prepayment and the Refund

What the NJ exit tax is, and what it is not

“Exit tax” is a nickname. The law behind it, N.J.S.A. 54A:8-9, was added in 2004 (P.L. 2004, c. 55) and the GIT/REP forms have been required to record a deed since August 1, 2004, according to the Division of Taxation's FAQ. GIT stands for Gross Income Tax, New Jersey's income tax, and REP for real property.

The Division says the forms exist “to determine whether a nonresident seller/grantor is required to pre-pay estimated Gross Income Tax.” A county clerk may not record the deed without the right GIT/REP form and any payment due, under TB-57(R). New Jersey residents who stay residents also file a GIT/REP form, but GIT/REP-3 box 1 lets them pay any tax on the gain later, on their resident return.

Two common errors in pages that rank for this search: the exit tax is not a realty transfer fee (the Division calls the two “separate requirements”), and the gain rate is not 8.97%. The Division's current FAQ, Form GIT/REP-1 (revision 10-21), and TB-57(R) (revised June 15, 2026) all use the highest Gross Income Tax rate, 10.75%. The 8.97% figure still appears in the Division's older “Buying or Selling a Home in New Jersey” guide (PDF last modified August 12, 2025), which may be where it comes from.

Exit tax vs realty transfer fee vs the over-$1 million fee

Three different charges can show up on a New Jersey seller's closing statement. Only the first is an income tax prepayment that can come back. The Division's FAQ says the realty transfer fee exemptions do not apply to the 2% nonresident withholding, and that “the RTF is separate from the Gross Income Tax.”

The fee on sales above $1 million is the one many sites call the “mansion tax.” The Division's own pages call it the Graduated Percent Fee. For deeds submitted for recording on or after July 10, 2025, when P.L. 2025, c. 69 took effect, it is graduated by price and charged to the seller instead of the buyer. The Division's own example: a $2.75 million sale owes 2.5% of $2.75 million, or $68,750, at recording.

The five GIT/REP forms: which one you sign

Every seller signs one GIT/REP form for the deed to record; only sheriff's sales and bankruptcy trustee sales are excepted, per the FAQ. Each owner signs a separate form, except a married couple who will file a joint New Jersey return. Since October 1, 2025, only the current versions on the Division's website are accepted for forms signed on or after that date.

Who is exempt: the 16 boxes on GIT/REP-3

If any box applies, the seller signs GIT/REP-3 instead of paying at closing. The list below is the form's own wording, shortened. Box 1 is for New Jersey residents only; boxes 2 to 16 can be used by residents and nonresidents, including people who are not U.S. citizens, according to TB-57(R).

• Box 1: the seller is a New Jersey resident individual, estate, or trust who will file a resident return.
• Box 2: the property was used exclusively as a principal residence under Internal Revenue Code section 121.
• Box 3: a mortgagor conveying to the mortgagee in foreclosure or in lieu of foreclosure, with no added consideration.
• Box 4: the seller or buyer is a listed federal or New Jersey agency, Fannie Mae, Freddie Mac, Ginnie Mae, or a private mortgage insurer. A county or town does not count, per the FAQ.
• Box 5: the seller is not an individual, estate, or trust, such as a corporation, partnership, or LLC.
• Box 6: total consideration of $1,000 or less.
• Box 7a and 7b: gain not recognized under Internal Revenue Code section 721, 1031, or 1033, or the seller received only like-kind property.
• Box 8: an executor or administrator transferring to a devisee or heir to distribute the estate.
• Box 9: a short sale where the lender receives all proceeds.
• Box 10: a deed dated before August 1, 2004 that was never recorded.
• Box 11: a relocation-company transaction at the same price.
• Box 12: a transfer between spouses or incident to divorce under Internal Revenue Code section 1041.
• Box 13: a cemetery plot.
• Box 14: the seller receives no net proceeds on the settlement sheet.
• Box 15: a retirement trust with an IRS acknowledgment letter.
• Box 16: property bought while a New Jersey resident by a service member now deployed on active duty outside New Jersey.

The FAQ adds one point people often miss: a parent selling to a child gets no special exemption. The same boxes apply as in any other sale. For property that came to you through an estate, see the NJ inheritance tax guide for the separate waiver New Jersey real estate needs before it can pass to heirs.

Selling your home: the principal residence box

Box 2 covers a home that qualifies for the federal principal residence exclusion. The Division's “Buying or Selling a Home” guide repeats the federal tests: you owned the home and lived in it as your main home for two or more years of the five years ending on the sale date, and you did not exclude gain on another home in the two years before. The exclusion is up to $250,000 of gain, or $500,000 for a married couple filing jointly.

The Division's documents differ on one detail, so it is worth asking whoever handles the closing. The FAQ says that if the entire gain cannot be excluded, the seller does not qualify for the exemption. The GIT/REP-3 instructions (revision 8-25) and TB-57(R) say box 2 can still be checked, that tax on gain above the exclusion is paid on the NJ-1040 or NJ-1040NR, and that the seller may make an estimated payment with Form NJ-1040-ES after recording.

Moving out of New Jersey: resident or nonresident on the closing day

Whether you sign GIT/REP-3 box 1 or GIT/REP-1 turns on your residency for the sale. This page does not suggest when to move. It sets out what the Division's documents say, because they are not worded the same way.

The FAQ defines a resident as someone who “is and intends to continue to maintain a permanent place of abode” in New Jersey on or after the day of transfer, and says: “When you move out of New Jersey on or after the day of transfer, you are considered a nonresident. Part-year residents are considered nonresidents.” The “Buying or Selling a Home” guide says residents who sell and move out of the state “are considered nonresidents for the purpose of the sale.”

TB-57(R), revised June 15, 2026, describes box 1 as “based on the date of closing” and gives an example: Mary sells her New Jersey home in April, the deed is recorded in May, and because she was a resident at the time of closing, box 1 is acceptable “even though subsequent to the recording of the deed by the county the seller becomes a nonresident.” Which reading fits a given move is a question for the CPA or attorney handling the sale.

• The year you move, the Division treats you as a part-year resident. You file Form NJ-1040 for the resident period, and if you had New Jersey income after moving, such as the gain on New Jersey property sold after you left, Form NJ-1040NR as well.
• The filing threshold for that year is gross income from everywhere above $10,000 (single, or married filing separately) or $20,000 (married filing jointly, head of household, or qualifying widow(er)), per the Division's part-year resident page.

NJ exit tax worked examples, with the sums shown

These are our arithmetic from the formula in N.J.S.A. 54A:8-9 and the FAQ, shown so you can check a figure; they are not an estimate for any sale. The last column applies the tax-rate table printed on Form A-3128, which the Division uses for the refund claim; the actual tax is figured on the NJ-1040NR with all of the year's income, so the real refund can differ.

The A-3128's own example: a property sold for $315,000 with a federal adjusted basis of $279,000 has a $36,000 gain. The table rate for that gain is 3.5%, so the estimated liability is $1,260. With $6,000 paid at closing, the refund claim is $4,740.

• Unequal ownership: each seller's form shows that seller's own percentage. A nonresident tenant in common multiplies their ownership percentage by the gain, then by 10.75%, and pays no less than 2% of their share of the consideration (FAQ).
• If a sale contract gives one seller more than their ownership share, that seller uses the amount actually received and shows the agreement to the county clerk (FAQ).
• This page has no calculator. If you were looking for an NJ exit tax calculator, the arithmetic is the two columns above: take the larger one.

Selling at a loss: the 2% still applies unless you get a waiver

The FAQ is direct: even with no gain, the seller must pay at least 2% of the total consideration on or before closing. TB-57(R) adds that a seller selling at a capital loss “must request a waiver from the Division” on Form GIT/REP-4.

The waiver request goes to the GIT/REP Unit with the original deed into the seller, the proposed deed, the settlement statement or closing disclosure, and a letter explaining the reason. If the loss comes from capital improvements, TB-57(R) asks for an itemized list with amounts. The waiver only works before the deed is recorded; after that, the only route back is a refund claim on Form A-3128 or the NJ-1040NR.

How to get the NJ exit tax back: three refund routes

The prepayment is a credit. TB-57(R) and the FAQ describe three ways to recover any part that exceeds the tax actually owed. In every case the nonresident return still has to be filed: the A-3128 says payment “does not relieve you of your responsibility to file the required return.”

• Due date: the NJ-1040NR instructions say the New Jersey return is generally due when the federal return is due; the 2025 return was due April 15, 2026.
• Statute of limitations: the NJ-1040NR instructions describe it as generally three years after the filing date or two years from the date the tax was paid, whichever is later.
• A New Jersey resident whose withholding was paid in error can claim it on Form A-3128, the NJ-1040, or the NJ-1040X, per TB-57(R).
• The Division must have a record of receiving the payment before it can process an A-3128, according to the form.

Estates and trusts selling New Jersey real estate

An estate or trust completes the form that matches its own residency, per the FAQ. A New Jersey resident estate or trust signs GIT/REP-3; a nonresident estate or trust signs GIT/REP-1 or GIT/REP-2 unless a box applies. Executors sign when there is a will, the administrator when there is not, and all executors or trustees may sign one form with an attachment.

Two rules are particular to estates. When an executor or administrator transfers the property to an heir to distribute the estate, box 8 applies and nothing is prepaid. When an estate or trust does pay, the gain is figured “without reduction for any distribution of income to the beneficiaries” during the year (N.J.S.A. 54A:8-9(c)). A trustee or executor who is also a beneficiary-seller signs two forms, one in each role.

Selling inherited New Jersey property usually also involves the inheritance tax waiver for the real estate. The NJ inheritance tax guide explains the classes, the 8-month deadline, and Forms 0-1 and L-9.

How to avoid the NJ exit tax: what the law already exempts

This page does not recommend a plan. Searches for avoiding the exit tax are really asking which sales are outside the prepayment, and the answer is in the GIT/REP-3 boxes and the waiver rules. Choosing among them is a decision for the seller with a licensed CPA or attorney.

• Being a New Jersey resident for the sale (box 1), read with the residency section above.
• A principal residence that qualifies under section 121 (box 2).
• A qualifying 1031 like-kind exchange (box 7a or 7b). If only part of the exchange qualifies, TB-57(R) allows 2% on the nonexempt amount at recording, or an NJ-1040-ES payment afterwards.
• No net proceeds to the seller on the settlement sheet (box 14), or a short sale (box 9).
• A sale at a loss, through a GIT/REP-4 waiver approved before recording.
• Selling through a corporation, partnership, or LLC that owns the property (box 5). Such entities do not pay the 2% withholding, per the FAQ.

Who files the NJ-1040NR, and who can help: check the license first

The seller signs the GIT/REP form and the return. A CPA can figure the gain and basis, prepare the A-3128 and the NJ-1040NR, and say which GIT/REP-3 box, if any, fits. On the A-3128, a paid preparer lists the firm name, address and federal EIN and their own Social Security number or PTIN, and a claim prepared by anyone other than the taxpayer must include an Appointment of Taxpayer Representative.

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