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New Jersey

1031 Exchanges
New Jersey

What is a 1031 exchange?

A 1031 exchange is a tax strategy that allows you to defer paying capital gains taxes when you sell an investment property, as long as you reinvest the proceeds into a new, like-kind property. This means you can sell one property and buy another similar one without immediately paying taxes on any gains from the sale.

These like-kind exchanges are covered under Section 1031 of the Internal Revenue Code (hence the name "1031 Exchanges") and apply to federal capital gains taxes. However, each state has their own tax code, and may have different rules for real estate tax withholdings, the ability to complete a tax-deferred sale, or the rules around like-kind exchanges. Below we'll dive deep into these state-level specifics.

New Jersey State Taxes

New Jersey Real Estate Withholding Taxes

In New Jersey, the real estate tax withholding rules are governed by the Bulk Sale Notification requirements.

  1. Bulk Sale Notification: When selling real estate used for income or business purposes, the buyer must file Form C-9000 with the New Jersey Division of Taxation at least 10 days before closing. This form notifies the Division of the transaction and allows them to determine any tax liabilities.
  2. Escrow Requirement: Within 10 days of receiving the notification, the Division will issue a notice indicating the amount to be held in escrow at closing. This amount covers existing tax debts, delinquencies, assessments, and estimated tax on the gain from the sale.
  3. Exemptions: The seller can file an Asset Transfer Tax Declaration form to help the Division calculate the estimated tax on the gain. If the transaction is part of a 1031 exchange, this can affect the calculation of the estimated tax, and the Division may adjust the escrow amount accordingly.
  4. Payment from Escrow: The taxes are paid from the escrow account once the Division has determined the final tax liability.
  5. Exemptions for Certain Properties: The sale of a one- or two-family residential rental property owned by an individual, estate, or trust is exempt from the Bulk Sale law. This exemption also applies to properties owned by any combination of individuals, estates, or trusts, but not to businesses.

For more detailed information, you can visit the New Jersey Division of Taxation's website or consult with a tax advisor to ensure compliance with all requirements.

New Jersey Capital Gains Tax Rates

State Tax Rate
10.75%
Local Tax Rate
0.50%
Combined Tax Rate
35.75%
Deductions
None

The Combined Rate accounts for Federal, State, and Local tax rate on capital gains income, the 3.8 percent Surtax on capital gains and the marginal effect of Pease Limitations (which results in a tax rate increase of 1.18 percent).

Income Taxes

New Jersey levies state taxes at rates ranging from 1.40% to 10.75%, assessed over progressive income brackets.

New Jersey 1031 Exchange Rules

Many states recognize and follow the federal rules for a qualifying 1031 exchange. We recommending reviewing these resources for 1031 exchanges at the federal level - learn about the rules for an exchange, the key deadlines you must meet, and why you are required to work with a Qualified Intermediary like Deferred.com.

1031 Exchange Companies in New Jersey

Deferred

Nationwide, including New Jersey

8,000+ Exchanges (and counting...) - Deferred is redefining how 1031 exchanges should be. Our experienced team delivers a service level that exceeds expectations, with no fee—while earning you interest on your exchange funds.

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No Fee + Earn Interest
  • Simple & compliant process
  • No hidden fees or upsells
  • Forward Exchange for No Fee

1031 Exchange Brokers Serving New Jersey

Shaan Dadlani

sdadlani@northmarq.com

Shaan Dadlani is an associate in Northmarq’s New York office. His focuses include the acquisition and disposition of retail properties, placing an emphasis on customer experience. He utilizes his background in data and analytics to provide clients with market-based insights and recommendations. 


Prior to Northmarq, Shaan spent three years at Yancey Realty, a boutique real estate firm in Charlotte, NC where he closed over $10 million in transactions. Before then, he spent over seven years working within data and analytics at Red Ventures, assisting major brands across the U.S. with their data collection and synthesis. 

Specialty: Net Lease Retail

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Jason Petrick

Marcus & Millichap

jason.petrick@marcusmillichap.com

Jason Petrick is a Senior Associate at Marcus & Millichap’s New Jersey office, focusing on net-leased retail and industrial properties across the United States. He is dedicated to creating value throughout an asset’s lifecycle for a diverse range of clients.

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William Betancourt

KW Commercial

william@sarhanhotelgroup.com

William is a seasoned real estate professional with over 17 years of experience specializing in the commercial real estate shadow market, providing market analysis and acquisition strategies for investors. He holds a B.S. in Real Estate and Finance from Florida State University and has led projects in note acquisition, distressed hotel repositioning, and cash flow optimization.

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Deferred.com Resources

Learn More

What is a 1031 Exchange?

A 1031 exchange allows real estate investors to sell a property and reinvest the proceeds into a new purchase and defer capital gains taxes. We dive deep into tax deferred like-kind exchanges, covering how 1031 exchanges work, the rules and timelines, and when it makes sense to do an exchange.

Aaron LaRue

1031 Exchange Rules & Checklist

A 1031 exchange can be an incredible tool for real estate investors to reduce their tax liability. We demystify the rules required to qualify and successfully complete a like-kind exchange.

Daniel Osman, CPA

The Ultimate Guide to Reverse 1031 Exchanges

Explore the concept of a reverse 1031 real estate exchange, its differences from a traditional 1031 exchange, and their respective advantages and disadvantages. Learn about timelines, the role of qualified intermediaries, tax implications, important considerations, and step-by-step guides to successful exchanges.

Daniel Osman, CPA