Does New Jersey have a capital gains tax?
New Jersey capital gains tax is not a separate tax: the state counts net gains from selling property as income under its Gross Income Tax and taxes them at the same graduated rates as wages, from 1.4% to 10.75%. There is no lower rate for property you held a long time, and no special rate for depreciation.
That makes New Jersey one of the more expensive states to sell in. A couple who sells an apartment building with a $1 million gain will pay most of it at 8.97% and 10.75% to Trenton, on top of federal tax. The state also collects money at the closing table through the Realty Transfer Fee, and from nonresident sellers through an estimated tax payment that is a condition of recording the deed.
New Jersey income tax brackets for 2026
New Jersey has eight brackets for joint filers and seven for single filers, and the top rate of 10.75% starts above $1,000,000 of taxable income for both. These are the Division of Taxation rate schedules in force for 2020 and later years. We found no change for 2026.
- Your gain is added to your wages, interest and other New Jersey income, so the bracket depends on the whole year.
- A gain realized in one big year pushes more of it into the top two brackets than the same gain spread over several years with an installment sale.
| Rate | Married filing jointly, head of household | Single, married filing separately |
|---|---|---|
| 1.4% | $0 to $20,000 | $0 to $20,000 |
| 1.75% | $20,000 to $50,000 | $20,000 to $35,000 |
| 2.45% | $50,000 to $70,000 | Not used |
| 3.5% | $70,000 to $80,000 | $35,000 to $40,000 |
| 5.525% | $80,000 to $150,000 | $40,000 to $75,000 |
| 6.37% | $150,000 to $500,000 | $75,000 to $500,000 |
| 8.97% | $500,000 to $1,000,000 | $500,000 to $1,000,000 |
| 10.75% | Over $1,000,000 | Over $1,000,000 |
How New Jersey tax stacks on top of federal tax
You pay New Jersey tax and federal tax on the same gain, and the federal side has its own split between depreciation and appreciation. For 2026, under Revenue Procedure 2025-32, the 20% federal rate on long-term gains applies above $613,700 of taxable income for joint filers and $545,500 for single filers. Below that, the 15% rate applies, and the 0% rate covers income up to $98,900 joint and $49,450 single.
Depreciation you took is taxed federally as unrecaptured Section 1250 gain at up to 25%. The 3.8% net investment income tax applies when modified adjusted gross income passes $250,000 joint or $200,000 single, and rental real estate gains count unless you qualify as a real estate professional who materially participates.
| Part of the gain | Federal rate (2026) | New Jersey rate |
|---|---|---|
| Depreciation taken (unrecaptured 1250 gain) | Up to 25% | Ordinary GIT rates, up to 10.75% |
| Appreciation above original cost | 0%, 15% or 20% | Ordinary GIT rates, up to 10.75% |
| Net investment income tax | 3.8% above the MAGI thresholds | None |
| Short-term gain (held one year or less) | Ordinary rates up to 37% | Same GIT rates as long-term |
Short-term and long-term gains in New Jersey
New Jersey makes no distinction between short-term and long-term gains. A building you flipped in eight months and one you held for 25 years are taxed under the same brackets. The holding period still matters for your federal return, where a sale after one year or less is taxed at ordinary rates up to 37%.
For owners who are close to the one-year mark, the state math does not change. Waiting a few weeks only helps on the federal side.
Depreciation recapture in New Jersey
New Jersey has no separate recapture rate, so depreciation is folded into the gain and taxed at the regular Gross Income Tax rates. The bigger issue is that your New Jersey basis can be different from your federal basis.
New Jersey does not follow federal bonus depreciation, and it limits the Section 179 deduction to $25,000. If you or a cost segregation study took bonus depreciation on the building’s short-life components, you claimed less depreciation for New Jersey than for federal purposes. That leaves a higher New Jersey basis and a smaller New Jersey gain when you sell. The adjustment is tracked on Worksheet GIT-DEP, and your preparer should pull those worksheets from prior years before the closing statement is final.
Nonresident sellers: the GIT/REP-1 payment at closing
Nonresident individuals, estates and trusts must make an estimated Gross Income Tax payment at or before closing, and the county clerk will not record the deed without it. The payment is reported on Form GIT/REP-1 under N.J.S.A. 54A:8-8 to 8-10.
The amount is your estimated gain times 10.75%, but never less than 2% of the sale price. On a $2,000,000 sale with a $1,140,000 gain, that is $122,550, because 10.75% of the gain is larger than the $40,000 minimum. The payment is a credit against your actual New Jersey tax. You file a New Jersey nonresident return for the year, and any excess comes back as a refund.
New Jersey residents, and sellers who meet an exemption, sign Form GIT/REP-3 instead and pay nothing at closing. Residents report the gain on their regular return and may owe quarterly estimates. One exemption on GIT/REP-3 covers gain that is not recognized federally under Sections 721, 1031 or 1033, which is how an exchange avoids the payment.
The Realty Transfer Fee and the mansion tax
New Jersey puts its transfer fees on the seller. The Realty Transfer Fee is due on every deed, and its top rate is $6.05 per $500 of consideration over $1,000,000.
A second charge, the Graduated Percent Fee, applies to deeds over $1,000,000 and is often called the mansion tax. It is now paid by the seller and is a percentage of the full price, so crossing a threshold raises the fee on every dollar.
- It covers Class 2 residential property, Class 4A commercial property other than industrial or apartment property, Class 4C cooperative units and certain farms with a residence.
- Apartment buildings are excluded. A five-unit or larger building sold as an apartment property pays the Realty Transfer Fee but not the Graduated Percent Fee.
- Form RTF-1EE must be filed with every deed over $1,000,000 and every commercial transfer, so expect the title company to ask how the property is classed.
| Total consideration | Graduated Percent Fee |
|---|---|
| Over $1,000,000 to $2,000,000 | 1% |
| Over $2,000,000 to $2,500,000 | 2% |
| Over $2,500,000 to $3,000,000 | 2.5% |
| Over $3,000,000 to $3,500,000 | 3% |
| Over $3,500,000 | 3.5% |
Worked example: selling a $2 million apartment building in New Jersey
A married couple living in Bergen County sells a 16-unit building for $2,000,000. Selling costs, including the Realty Transfer Fee, are $60,000, so the amount realized is $1,940,000. They bought it for $1,200,000 and have taken $400,000 of straight-line depreciation, which leaves an adjusted basis of $800,000 and a gain of $1,140,000. Their other income is $400,000.
Federal tax: $400,000 of the gain is unrecaptured Section 1250 gain at 25%, or $100,000. The other $740,000 is taxed at 20%, or $148,000. The 3.8% net investment income tax on the full gain adds $43,320. Federal tax on the sale is $291,320.
New Jersey tax: the gain starts at $400,000 of income, so $100,000 falls in the 6.37% bracket ($6,370), $500,000 in the 8.97% bracket ($44,850) and $540,000 in the 10.75% bracket ($58,050). New Jersey tax on the sale is $109,270, an effective state rate of about 9.6% on the gain.
Combined, the couple owes about $400,590 before any credits or deductions, roughly 21% of the amount realized. Because the building is an apartment property, there is no Graduated Percent Fee. A $2,000,000 house or small office building would owe a 1% fee of $20,000 on top.
If the same couple lived in Pennsylvania, the GIT/REP-1 payment at closing would be $122,550, credited toward the New Jersey nonresident return. You can run your own numbers in the capital gains tax calculator.
How a 1031 exchange changes New Jersey tax
A 1031 exchange defers New Jersey tax along with federal tax, because New Jersey accepts gain that is not recognized federally under Section 1031. In the example above, a full exchange into a $2,000,000 or larger replacement would push the $400,590 into the future.
New Jersey does not claw back the deferred gain if the replacement is in another state. A nonresident seller claims the exchange exemption on GIT/REP-3 and makes no estimated payment at recording, as long as the exchange covers the whole gain. Cash or debt relief you keep is taxable boot for both governments. If the exchange fails, the qualified intermediary must file GIT/REP-1 and pay 2% of the total consideration. Our guide to the 1031 exchange in New Jersey covers those filings, and the 1031 exchange rules page covers the federal deadlines.
Ways to lower the New Jersey tax on a sale
The New Jersey bill depends on how much income lands in the top two brackets in a single year, so most planning is about timing and deferral. None of these steps changes the rate itself.
- Pick the closing year with care. If you plan to retire or your other income will drop, a January closing can move the gain into a year with less income stacked under it.
- Rebuild your New Jersey basis. Pull every Worksheet GIT-DEP you filed so the state gain reflects the bonus depreciation New Jersey never allowed.
- Exchange instead of selling. A 1031 into another building or a Delaware statutory trust defers both federal and New Jersey tax, with no clawback.
- Contribute to an operating partnership. A Section 721 contribution to a REIT partnership is another federal deferral that GIT/REP-3 recognizes.
- Check the property class before you list. Confirm the building is assessed as an apartment property so the Graduated Percent Fee does not apply.
Selling a New Jersey apartment building to Skyline
Skyline buys apartment buildings with five or more units in New Jersey, from Newark and Jersey City to the shore towns. We buy directly, close on your timeline, and can work inside 1031 deadlines. A set closing date lets your CPA plan the tax year, the GIT/REP paperwork and any exchange around it.
Selling? Spread the tax with seller-carry terms
If a large tax bill is what is keeping you from selling, an installment sale may help. When you carry part of the price as a note, the gain is generally reported as you receive payments instead of all in the year of sale. Some parts of the gain, such as certain depreciation recapture, can still be due up front, so run the numbers with your CPA first.
Skyline Capital Investments buys apartment buildings with five or more units and can offer seller-carry terms, or a delayed closing that fits your 1031 timeline. Send the address and unit count and we typically respond within 48 hours. How seller financing works · How an installment sale is taxed · Seller financing calculator.
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