Updated October 7, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. The NJ-1040 instructions say “Capital gain is calculated the same way as for federal purposes.” and the Division’s home-sale guide says you can “exclude up to $500,000 of the gain” on a joint return. Residents file Form GIT/REP-3 at closing; nonresident sellers prepay unless a principal-residence box applies.
New Jersey tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Follows the federal calculation: the Division says gain is calculated the same way as federally |
| Rate on gain above the exclusion | Graduated: multipliers from .014 on the first $20,000 to .1075 at $1,000,000 and over (2025 schedules) |
| Collected at the sale | Residents file GIT/REP-3 and prepay nothing; nonresidents prepay 10.75% of the gain, but not less than 2% of the consideration, unless the principal-residence box applies; sellers pay a 1% Realty Transfer Fee |
| Source | NJ Division of Taxation |
What the New Jersey documents say
The 2025 NJ-1040 instructions say “Capital gain is calculated the same way as for federal purposes.” The Division of Taxation’s guide to buying or selling a home says a seller may “exclude up to $500,000 of the gain” on a joint return, following the federal guidelines.
Gain above the exclusion is taxed under the Gross Income Tax rate schedules, which in 2025 use multipliers from .014 on the first $20,000 up to .1075 on income of $1,000,000 and over.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in New Jersey sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so $0 of it is taxable and New Jersey taxes $0 of it. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000, which is taxed under the Gross Income Tax rate schedule; this page computes no rate.
What is collected at the sale
Form GIT/REP-3 is the seller’s residency certification. A seller who is a resident files it at closing and owes no estimated payment then. A nonresident seller pays estimated Gross Income Tax before or at closing. Form GIT/REP-1 says the amount is found by “multiplying the gain from the sale of the property by the highest Gross Income Tax rate (10.75%)”, and that it “cannot be less than 2% of the consideration received for the sale”. No estimate is due if the seller checks the GIT/REP-3 box for a “principal residence as defined in 26 U.S. Code section 121”. The guide adds: “Sellers pay a 1% Realty Transfer Fee on all home sales.”
What changes in 2026
The documents read for New Jersey announce no change for 2026 that is specific to the tax on a home sale. The forms and instructions read are for tax year 2025 or the newest page archived; check the state agency for 2026 forms when they are published.
What the documents do not say
- The Division’s home-sale guide still prints 8.97% of net gain for the nonresident estimate. The current Form GIT/REP-1 and the Division’s FAQ on N.J.S.A. 54A:8-9 both use the highest rate, 10.75%, with 2% of the consideration as the floor, and this page follows them. The rate schedules read are for 2025.
Common mistakes
- Assuming the 1% Realty Transfer Fee is a tax on your gain; the guide says sellers pay it on all home sales.
- Leaving out Form GIT/REP-3 at closing; a resident files it, and a nonresident without the principal-residence box prepays.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how New Jersey taxes capital gains, New Jersey retirement taxes, and home sale exclusion calculator.
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Answer againSources
- 2025 NJ-1040 Resident Income Tax Return Instructions: https://www.nj.gov/treasury/taxation/pdf/current/1040i.pdf
- GIT/REP-3 (8-25) Seller’s Residency Certification/Exemption: https://www.nj.gov/treasury/taxation/pdf/other_forms/tgi-ee/gitrep3.pdf
- New Jersey Tax Guide: Buying or Selling a Home in New Jersey: https://www.nj.gov/treasury/taxation/documents/pdf/guides/Buying-or-Selling-a-Home-in-New-Jersey.pdf
- GIT/REP-1 Nonresident Seller’s Tax Declaration: https://www.nj.gov/treasury/taxation/pdf/other_forms/tgi-ee/gitrep1.pdf
- FAQs on GIT Forms Requirements for Sale/Transfer of Real Property in New Jersey: https://www.nj.gov/treasury/taxation/gitrepfaqs.shtml
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.