Last Updated: April 2026
New Jersey has the highest property taxes in the US and a top income tax rate of 10.75%. For high earners and retirees, leaving New Jersey — particularly to Florida, Texas, or another no-income-tax state — can save $15,000–$50,000/year in combined income and property taxes. New Jersey's specific departure consideration is the 'exit tax' on home sales, which creates a cash flow issue at closing even when your actual liability is lower.
This guide covers New Jersey's exit tax mechanism, what constitutes New Jersey residency, the part-year return filing requirements, and key planning considerations for departing NJ taxpayers.
New Jersey's 'exit tax' (technically a withholding requirement under N.J.S.A. 54A:8-9) requires that when a non-New-Jersey-resident (or someone who will not be a NJ resident after the sale) sells a New Jersey property, the buyer must withhold the greater of:
The withheld amount is paid to the NJ Division of Taxation at closing. It is NOT a final tax — it is a withholding on account. You reconcile the actual NJ tax liability when you file your return, and any excess withholding is refunded.
The 2% of sale price withholding can be significant: on an $800,000 home, 2% = $16,000 withheld at closing. If your actual NJ tax on the gain is only $5,000 (e.g., after the federal primary residence exclusion of $250K–$500K reduces the taxable gain), you'd receive an $11,000 refund when you file. But the cash flow impact at closing is real — plan for it when budgeting your move.
New Jersey uses similar tests to New York for determining residency:
Your permanent home where you intend to remain indefinitely. To change NJ domicile: establish genuine domicile elsewhere — update your driver's licence, voter registration, vehicle registration, bank accounts, and primary address to the new state.
Even with non-NJ domicile, you are taxed as a NJ resident if you: maintain a permanent place of abode in NJ AND spend more than 183 days in NJ in the tax year. Same trap as New York — keeping your NJ home while visiting regularly.
For the year you leave: file Form NJ-1040 or NJ-1040NR as a part-year resident. Income earned while a NJ resident is fully taxed; NJ-source income after departure (rental income from NJ property, NJ wages) remains taxable to non-residents.
Unlike New York, NJ does not have a separate city income tax. NJ's statutory residency test mirrors New York's but NJ's audit of departures is generally considered less aggressive than New York's or California's — though high-income departures do get scrutiny.
New Jersey's treatment of retirement income is more complex than many states:
For retirees with income above $150,000, the exclusion phases out and pension/IRA income is fully taxable at NJ rates. A retired couple with $200,000 in pension + IRA income in NJ faces tax of approximately $13,000–$18,000 in NJ alone — versus $0 in Florida or Texas. This is the primary driver of the NJ-to-FL retiree migration.
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Get Matched With a CPA →The withholding is the greater of 2% of the sale price or 8.97% of the estimated gain. For most primary home sales with significant built-up equity, the 2% of sale price typically produces the higher withholding amount. On a $700,000 home: 2% = $14,000 withheld. If your gain after the federal exclusion is $100,000, the 8.97% calculation = $8,970. The 2% figure ($14,000) is higher, so $14,000 is withheld. You then file an NJ return, calculate the actual NJ tax (maybe $8,970), and receive approximately $5,000 refund. The exit tax is a withholding mechanism — not a final levy — but the cash flow requirement at closing surprises many sellers.
The most popular NJ-to-Florida move saves approximately $15,000–$35,000+/year for typical upper-middle-income households: Florida has no state income tax (vs NJ's up to 10.75%), lower property tax (0.86% vs NJ's 2.23%), lower cost of living in most areas, and a warm climate. Pennsylvania (lower property tax and 3.07% flat income tax) is popular for those who want to stay nearby and have NJ-area employment ties. Texas offers no income tax but comparable or higher property tax in many markets. For retirees specifically: Florida's lack of income tax on pension and IRA income (vs NJ taxing both above the exclusion threshold) is the dominant financial factor.
No — New Jersey exempts military pension/retirement pay from state income tax entirely. Active duty military pay for NJ residents serving outside NJ is also generally exempt. This makes NJ somewhat more competitive for military retirees than the headline pension tax treatment suggests — though for retirees with civilian pensions or IRA income above the exclusion threshold, NJ's taxation of that income remains a significant factor.