Real Estate Law

New Jersey's 2004 Tax changes With Regard To The Sale Of Real Estate

Effective August 1, 2004, the New Jersey legislature has increased fees and taxes payable on the sale or transfer of real property. The changes include an increase in the fees for the New Jersey Realty Transfer Fee, a mansion tax paid by the Buyer of residential real property valued at more than $1,000,000.00 and a non-resident tax for the sale of New Jersey property to Sellers who are not New Jersey residents.

TRANSFER TAX:

As of July 15, 2003, New Jersey has increased the realty transfer fee which is a fee paid by the Seller at the time the property is transferred. The transfer fee can be calculated as follows: (Fee per $1,000.00)

• $0.00 to $150,000.00 - $4.00 per $1,000.00
• $150,001.00 to $200,000.00 - $6.70 per $1,000.00
• $200,001.00 to $350,000.00 - $7.80 per $1,000.00

If the price of the property is over $350,000.00, the transfer fee can be calculated as follows:

• $0.00 to $150,000.00 - $5.80 per $1,000.00
• $150,001.00 to $200,000.00 - $8.50 per $1,000.00
• $200,001.00 to $550,000.00 - $9.60 per $1,000.00
• $550,001.00 to $850,000.00 - $10.60 per $1,000.00
• $850,001.00 to $1,000,000.00 - $11.60 per $1,000.00
• Anything over $1,000,000.00 - $12.10 per $1,000.00

Please note that the realty transfer fee must be collected at the time of closing and submitted to the County Recording Officer when the Deed is submitted for recording.

The law does not specify what party must pay the realty transfer fee; however, this fee is customarily paid by the Seller.

MANSION TAX:

As of August 1, 2004, the Buyer of a residential property for consideration or a sales price in excess of $1,000,000.00 must pay a fee of 1% of the entire purchase price. The fee applies to the sale or purchase of land which is zoned for residential use.

NON-RESIDENTS SALES TAX:

A person who owns property in New Jersey who is not a New Jersey resident, at the time of the sale of the property, the Seller of the property is also required to pay an estimated gross income tax due on the capital gains of the sale of the property. This tax applies to non-resident individuals, estates and trusts. At the time of closing, the Seller will be asked to fill out a form certifying whether or not the sale is subject to the payment of the gross income tax, i.e., if they are not a New Jersey resident. The tax must be collected at the time of closing; otherwise, the County Recording Office will not record the Deed.

The amount of gain on a property is computed based upon Federal Income Tax criteria, but may not be less than two percent (2%) of the consideration or price as stated in the Deed.

The only exceptions or the only time that the tax does not have to be paid by non-resident individual trusts or estates is as follows:

• If the property being sold is used exclusively as the principal residence of the Seller;
• The transfer of the property is in the form of a Deed in lieu of foreclosure or a Deed in satisfaction of a foreclosure equal to the amount of the foreclosure; and
• If the Seller is an agency of the U.S. or the New Jersey Government, Federal National Mortgage Assoc., Federal Homeowners Mortgage Corporation, the Government National Mortgage Assoc., or a private mortgage insurance company.

The taxes and transfer fees are subject to change, one should consult with an attorney or their accountant, not only at the time of closing, but on or before the time period that the parties sign the contract and were to completely understand the fee and tax requirements at the time of closing.

For more information, please contact Blair C. Lane, Sr., at 856-528-3010. Initial consultations are free.