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New Jersey Real Estate Taxes
 

Here's some information resources concerning the NJ Transfer Tax  (which will effect you, as to what has to be withheld at closing, if you are currently a non-resident seller) and also the IRS Code Section 121

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NJ Transfer Tax:
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New Jersey become very aggressive under the leadership of Governor McGrevey to find additional sources of revenue. As a result:

When you buy or sell property in New Jersey, if you are a state resident and especially if you are a non-resident, you will be subject to one or more of the new or increased New Jersey Real Estate Transfer Fees (i.e., Taxes).

For more information, go to New Jersey's web site. A few direct links for you are:

Realty Transfer Fees (RTF)
http://www.state.nj.us/treasury/taxation/lpt/rtf.shtml

RTF Frequently Asked Questions (FAQs)
http://www.state.nj.us/treasury/taxation/lpt/rtffaqs.shtml

Main Taxation Page
http://www.state.nj.us/treasury/taxation/ (then click on "News")

 

UPDATE:   January 20, 2005,  Source: NJ Association of Realtors

Acting Governor Signs Laws Clarifying Real Estate Transaction Fees

On Thursday, January 20, 2005, Acting Governor Richard Codey signed into law two bills that will clarify laws implemented under Governor McGreevey’s administration.
 

• The first bill clarifies the law that established a requirement for nonresidents to pay estimated New Jersey gross income tax (ranging between 2-8%) on gain from New Jersey real estate transactions prior to the recording of the deed. The law signed by Acting Governor Codey specifies that the minimum payment of estimated gross income tax on a sale of real property in New Jersey by a nonresident is 2% of consideration paid on the sale, which was the procedure prior to the inception of the withholding provisions put forth under Governor McGreevey. This law shall take effect immediately and be retroactive to August 1, 2004.
  
  For more details reference: NJ Assembly, No. 3510, State of New Jersey, 211th Legislature, Introduced November 15, 2004
  
   
• The second bill Acting Governor Codey signed into law revises the statute imposing a 1% fee on the buyer of residentially zoned real property purchased for more than $1,000,000. The new law eliminates zoning status as the basis for determining the 1% fee. The new law specifically places the 1% fee on those properties classified as:

(1) Class 2 “residential” for assessment purposes;

(2) (a) Real property that includes property classified for assessment purposes as Class 3A “farm property (regular),” but only if the property includes a building or structure intended or suited for residential use, and (b) any other real property, regardless of class, that is effectively transferred to the same grantee in conjunction with the property described in (a); or

(3) A cooperative unit as defined in the cooperative recording law.

The law also exempts any transfer of property to a charitable organization that is exempt from federal income tax under section 501(c)(3) of the federal Internal Revenue Code.

The new law will take effect on February 1, 2005, but will apply retroactively to transfers of property occurring on or after August 1, 2004, which was the effective date of the statute that established the 1% fee. The new law provides for refunds to any transferee who has paid the fee but would not be subject to the fee under the provisions of this new law. Refund procedures have not yet been established by the Division of Taxation.

For more details reference: NJ Assembly, No. 3302, State of New Jersey, 211th Legislature, Introduced  September 27, 2004 [Second Reprint]
 

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IRS Code Section 121:
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SOURCE: www.money-secrets.com - 12/11/04 06:25:54 am, Categories: Tips and Ideas, 379 words   

Tax Free Exchanges: Watch out for the New Residence Rules

by Phil Craig
© Phil Craig, All Rights Reserved http://www.LivingTrustSecrets.com

On October 22, 2004, President Bush signed tax legislation that contained a provision affecting Internal Revenue Code section 1031 (the like-kind tax-free exchange rules).

Under this new provision a taxpayer who exchanges under Internal Revenue Code section 1031 into a rental house as a replacement property for a previous investor property and later converts it to his or her primary residence, is not allowed to exclude gain under the principal residence exclusion rules of Internal Revenue Code section 121, unless he/she sells the property at least five years from the date of its acquisition.

The results of this additional requirement to Internal Revenue Code section 121 is that anyone exchanging into a rental property that they such subsequently convert to personal use will have to wait at least five years from the date of acquisition before they can sell it as their residence and exclude any gain under Internal Revenue Code section 121.

The change to the home seller rules of Internal Revenue Code section 121 became effective for principal residence sales occurring on or after October 22, 2004. Any taxpayer who previously acquired their current residence through a tax-deferred exchange within the past three years will now have to wait at least another two years before selling their home and excluding any gain, provided they meet the two out of the five-year occupancy test for living in the property.

New legislation created in 1997/1998 allows taxpayers to exclude capital gains tax on their profits from the sale of their principal residence up to $250,000 for single taxpayers and up to $500,000 for married taxpayers provided they have lived in their principal residence for two out of the past five years. Taxpayers can exclude this gain any number of times provided they have met the two out of the five-year occupancy test.

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

Phil Craig is a licensed attorney and entrepreneur. He started practicing law at age 25 in 1979. He does not take on any more clients, but is advisor to some of the biggest names in the internet world. He shares his knowledge gained over the last 25 years at his Living Trust Secrets newsletter site:
click here =======> http://www.LivingTrustSecrets.com

 

 

 

 

 

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 Lawrence (Larry) Yerkes
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Member National Association of Realtors

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