New Jersey Taxes on Real Estate Transaction

[hanemen3]

Hello,

My son and his wife were married in 2021.  She previously owned a property from 2018 until March 2021 at which point she sold the property and they moved in with us prior to the wedding in July.  The sale netted about $40K in proceeds. They subsequently used the proceeds of the sale, as well as their own savings, and bought a new home in October 2021.  I assume it is in their best interest to file MFJ but how does NJ handle the sale and subsequent purchase of the homes from a tax perspective?  They are using TurboTax and it appears that they will owe the state approx $1500.  I can't help but think that they are being taxed twice.  Also, are you aware of any good resources covering these situations? 

Many thanks!!

Hanemen

[DavidD66]

You almost always pay less tax when married filing jointly than married filing separate.  As long as the house that was sold in March was your daughter-in-law's primary residence for 24 of the 60 months immediately preceding the sale, the gain (up to $250,000) is tax free.    The sale of the house would be reported on the federal tax return, but no gain would be recognized.  The sale is not reported on the state tax return.  For more information, see the following:

Is the money I made from a home sale taxable?

Is it better for a married couple to file jointly or separately?

[fanfare]

your house sale in NJ is reported on NJ-DOP but the capital gains exclusion of $250,000 cancels it out to zero.

NJ follows the Federal capital gains exclusion rule.

You have to enter under Sale of Home to get the exclusion.