NJ Exit Tax Exemption: GIT/REP-3 Boxes and GIT/REP-4 Waivers

A New Jersey exit tax exemption is claimed by filing Form GIT/REP-3 at closing and checking the box for the category that fits your sale — most often New Jersey residency, the principal residence gain exclusion, or a Section 1031 like-kind exchange. File the right form and the closing agent releases you from the 10.75%-of-gain or 2%-of-price withholding that non-resident sellers otherwise pay on settlement day.

What You Are Actually Exempting Yourself From

The “exit tax” is not a separate tax. It is an estimated prepayment of New Jersey gross income tax that non-resident sellers must make at closing, calculated as 10.75% of the gain or 2% of the total consideration on the deed, whichever is greater.¹ The 2% floor is the trap. Sell at a loss, and a non-resident with no exemption still writes a check for 2% of the sale price at closing and waits for a refund on the following year’s return.

The county clerk will not record the deed unless the closing agent submits either an estimated payment or a valid exemption form.² So the exemption question is really a form question: which GIT/REP form, which box, signed before settlement.

Residency Exemption (GIT/REP-3, Box 1)

If you are a New Jersey resident at the time of sale, file the GIT/REP-3 and check box #1. You certify residency under penalty of perjury and the closing agent waives the withholding entirely.³

New Jersey recognizes two paths to residency. The first is domicile — New Jersey is your permanent legal home, shown through markers like voter registration, driver’s license, and primary bank accounts. The second is the statutory presence test: maintaining a permanent place of abode in New Jersey and spending more than 183 days in the state during the tax year. Members of the Armed Forces are excluded from the 183-day rule.⁴

Signing box #1 commits you to filing a resident return (Form NJ-1040) for the year of the sale and paying tax on the gain through that return. The exemption moves the payment; it does not erase the tax.

Principal Residence Exemption (GIT/REP-3, Box 2)

If the property was your principal residence and the gain fits within the federal exclusion under Internal Revenue Code Section 121, check box #2 on the GIT/REP-3. Section 121 excludes up to $250,000 of gain for single filers and $500,000 for married couples filing jointly, provided you owned and used the home as your primary residence for at least two of the five years before the sale.⁵

Box #2 works for residents and non-residents alike.³ There is one important limit: the box certifies that the property was used exclusively as a principal residence. Rental years in the five-year window undercut that certification. And if your gain exceeds the exclusion — a single filer with $300,000 of gain, for example — only the excluded portion is covered; you still owe estimated tax on the $50,000 above the cap.

1031 Exchanges and Other Deferred-Gain Transactions (Box 7)

Sellers rolling proceeds into a qualifying replacement property under Section 1031 claim exemption by checking box #7a on the GIT/REP-3 and circling “1031.” The same box covers gain deferred under Section 721 (partnership contributions) and Section 1033 (involuntary conversions such as condemnation). If the seller received only like-kind property and no cash at all, box #7b applies instead.³

Read the small print before signing. If the exchange later fails, the form obligates you to file a New Jersey return and report the gain. Federal rules require you to identify a replacement property within 45 days and close within 180 days of selling the relinquished property. Miss either deadline and the exchange collapses. Any cash or non-like-kind property you receive as “boot” is taxable immediately, even in an otherwise successful exchange.

Other GIT/REP-3 Exemption Boxes

The GIT/REP-3 has more than a dozen exemption categories. The other commonly used boxes include:

Property transferred between spouses or pursuant to a divorce decree under IRC Section 1041 (box #12).
Total consideration of $1,000 or less (box #6).⁶
Conveyance by a mortgagor to the lender in foreclosure or in lieu of foreclosure, with no additional consideration (box #3).
Short sales where the seller receives no net proceeds and the mortgagee takes all sale proceeds to satisfy an agreed portion of the mortgage (box #9).
Transfers by an executor or administrator to a devisee or heir under a will or intestacy laws (box #8).
Transfers involving a U.S. or New Jersey government agency, Fannie Mae, Freddie Mac, or Ginnie Mae (box #4).
Sellers that are not individuals, estates, or trusts and are not required to make the estimated payment (box #5).
Sales where the seller receives no net proceeds per the settlement sheet (box #14).

Each box requires the seller to sign the form under penalty of perjury and hand it to the closing agent before settlement.³

The GIT/REP-4 and GIT/REP-4A Waivers

Two transactions fall outside the self-certified GIT/REP-3 route.

The GIT/REP-4 is a waiver issued by the Division of Taxation itself, bearing its raised seal. It covers transactions not otherwise addressed by the GIT/REP forms and not subject to the estimated payment. You cannot self-certify this one: the seller or an authorized representative applies, and the Division decides.⁷

The GIT/REP-4A is narrower still. It applies only when a deed is being re-recorded to fix a typographical error, incorrect property description, or similar clerical mistake, with no additional consideration changing hands. It is not a substitute for the GIT/REP-3 in zero-gain or loss sales.⁸

If No Exemption Fits

A non-resident who does not qualify for any GIT/REP-3 category must make the estimated payment. Two forms deliver it:

GIT/REP-1 is completed and submitted at closing. The seller calculates the estimated payment (10.75% of the gain or 2% of the sale price, whichever is greater), and the closing agent files the form and payment with the county clerk alongside the deed.
GIT/REP-2 lets the seller submit the payment directly to a Division of Taxation Regional Information Center before the closing date, which can simplify settlement.

Both forms apply to non-resident individuals, estates, and trusts.⁶ Without one of them, or a signed GIT/REP-3, the deed will not record.

If you paid the 2% floor on a sale that produced little or no gain, the overpayment comes back through your New Jersey return — a non-resident files Form NJ-1040NR — for the year of the sale. Skip the return and the state keeps the money. Electronic filers see refund processing begin about four weeks after filing; paper returns take at least 12 weeks, sometimes 15 or more if flagged for additional review.⁹

The Cost of a Wrong Certification

Every GIT/REP exemption form is signed under penalty of perjury. Certifying residency after you have moved out of state, or claiming the principal residence exclusion on a rental, is treated as perjury under New Jersey law when done with intent to evade tax.¹⁰

Beyond the criminal exposure, the Division audits these forms after the deed records. If an exemption is disallowed, the full tax comes back to the seller with interest running from the original closing date, plus penalties. The closing agent has no duty to test your claim; the state’s audit is where the paperwork actually gets checked.

1
Justia Law. New Jersey Code Title 54A Section 54A:8-9 – Payment of Estimated Tax by Nonresident Taxpayer on Certain Gains
2
New Jersey Division of Taxation. GIT/REP-1 Nonresident Seller’s Tax Declaration
3
State of New Jersey. GIT/REP-3 Seller’s Residency Certification/Exemption
4
New Jersey Revised Statutes. New Jersey Code Title 54 Section 54:8A-3 – Resident Defined
5
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
6
NJ Division of Taxation. FAQs on GIT Forms Requirements for Sale or Transfer of Real Property in New Jersey
7
New Jersey Division of Taxation. GIT/REP-4 Waiver of Seller’s GIT/REP Filing Requirement
8
New Jersey Division of Taxation. GIT/REP-4A Waiver of Seller’s Filing Requirement for Corrected Deed With No Consideration
9
NJ Division of Taxation. Check Your Refund Status
10
Cornell Law Institute. New Jersey Administrative Code 18:23-11.7 – Effect of False Swearing