Short answer
New Jersey calculates a capital gain the same way as the federal return, and anything taxable federally is taxable in New Jersey. The principal residence exclusion applies: up to $250,000 of gain, or $500,000 for a married couple filing jointly, if you meet the ownership and use tests. Sales tax is not due on a home sale.
Gain is figured like the federal return
The Division of Taxation's guide says you report any income earned on the sale of property as a capital gain, and that in New Jersey the gain is calculated the same way as for federal purposes. Any amount taxable for federal purposes is taxable for New Jersey. It points to IRS Publication 551 for basis. Residents report the gain on Schedule B of the NJ-1040, and nonresidents on Part I of the NJ-1040-NR. A loss is entered as 0 on the New Jersey form.
The principal residence exclusion
The guide says you may exclude all or part of the gain on your New Jersey principal residence, based on federal guidelines, if you meet three tests: you owned the home for two or more years during the five years before the sale, you lived in it as your principal residence for two or more years in that period, and you did not exclude gain from another home sale during the two years before. A married couple filing jointly may exclude up to $500,000. Any other filing status may exclude up to $250,000.
Partial exclusions
If you did not meet the tests, for example because of a change in place of employment, health or unforeseen circumstances, the guide says you may claim a reduced exclusion if you qualify for a reduced federal exclusion. It also notes that a second home, a vacation home or a property rented to someone else is not a principal residence under its glossary. A tax professional can tell you how these rules apply to a house you inherited, rented out or moved out of.
Other taxes on the sale
The guide states that sales tax is not due on home sales. The seller pays the Realty Transfer Fee at closing, and a GIT/REP form is filed with the deed. Residents who file GIT/REP-3 pay income tax on the gain when they file their return. Nonresidents may owe an estimated payment at closing. These are separate from the federal tax, which the sources I used do not cover.
Selling and keeping more of the price
No commission means one fewer cost taken from the price. Kaizen Home Buyers makes cash offers on New Jersey houses as-is, with no repairs and no agent commission. We can give an offer within 24 hours and close in 14 to 30 days or on the date you choose. Call 267-329-0084. We are not tax advisors. Ask your tax professional to estimate the gain before you decide between a cash sale and listing with an agent.