New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 35 - NEW JERSEY GROSS INCOME TAX › Subchapter 2 - EXCLUSIONS AND DEDUCTIONS › Section 18:35-2.4 - Election to exclude up to $ 500,000 of gain on sale of principal residence

Current through Register Vol. 56, No. 14, July 15, 2024
(a) The
				rules concerning the election to exclude up to $ 250,000 ($ 500,000 on a joint
				return) of gain on the sale of a principal residence are as follows:
1. General rule: Capital gains exclusion;
				taxpayers selling their principal residence may exclude all or part of any gain on
				the sale of a principal residence from gross income, regardless of taxpayers' age,
				subject to I.R.C. § 121, which terms are mirrored in the Gross Income Tax Act
				in 54A:6-9.1. Capital gain and the
				exclusion of all or part of the gain is computed in the same manner as for Federal
				income tax purposes, except that a civil union couple may use Federal income tax
				computations as necessary in calculating any gain as if they were married, for
				purposes of calculating the State income tax exclusion.
2. Requirements: Regardless of age, a taxpayer can
				claim the exclusion if, during the five-year period ending on the date of the sale,
				taxpayer meets the following two tests:
i. The
				taxpayer has owned the home for at least two years (ownership test); and
ii. The taxpayer has lived in the home as a
				principal residence for at least two years (the use test).
3. Joint return: In the case of jointly owned
				property where a joint return is filed, the taxpayers qualify for the exclusion if
				all of (a)3i through iii below apply. If only one spouse/civil union partner meets
				the requirements in (a)3i and ii below, the qualified spouse/civil union partner can
				exclude up to $ 250,000 of the gain when filing a joint or separate return.
i. Either spouse/civil union partner owned the
				property for a total of two years within the five-year period ending on the date of
				the sale; and
ii. Both spouses/civil
				union partners must have used the property as their principal residence for two
				years within the five-year period ending on the date of sale; and
iii. Neither spouse/civil union partner sold and
				excluded the gain from the sale of another home during the two years prior to the
				date of sale and after May 6, 1997.
4. Deceased spouse/civil union partner: In the
				case of an unmarried individual whose spouse/civil union partner is deceased on the
				date of the sale or exchange of property, the period the unmarried/no longer in a
				civil union individual owned and used the property includes the period the deceased
				spouse/civil union partner owned and used the property before the deceased
				spouse's/civil union partner's death.
5.
				Amount of exclusion: Any amount of the gain from the sale of a principal residence
				that is taxable for Federal income tax purposes is taxable for New Jersey income tax
				purposes. Any amount that is excludable from income for Federal income tax purposes
				is excludable for New Jersey income tax purposes. A civil union couple shall
				determine the State income tax exclusion in the same manner as a married
				couple.
6. The taxpayer must elect to
				exclude the gain realized from the sale or exchange of a principal residence for
				Federal income tax purposes in order to take the same exclusion for New Jersey
				income tax purposes.
7. Taxpayers who
				meet the Federal qualifications for a reduced exclusion due to a change in health,
				place of employment, or unforeseen circumstances may also claim the same reduced
				exclusion amount for New Jersey income tax purposes.