New Jersey
A 1031 exchange in New Jersey, organized around your closing.
Federal law decides whether an exchange qualifies. New Jersey adds paperwork at the deed: a residency or exemption form the county needs before it records, and a transfer fee that an exchange does not avoid.
If you are selling investment or business real estate in New Jersey and want to defer the gain, the exchange agreement and the assignment of your sale contract have to be signed before the deed is delivered. After that, New Jersey's own requirements are mostly about one form, GIT/REP-3, reaching the settlement agent correctly completed.
onezero3one acts as qualified intermediary for exchanges of New Jersey property, subject to a review of each file before an exchange agreement is signed. We work with your settlement agent and your tax advisor; we do not give tax or legal advice.
What is specific to this state
The federal rules in IRC §1031 decide whether an exchange qualifies. The items below are state requirements that sit alongside them at closing or on the return. Each links to the official source it was checked against; confirm the current version with your closing agent and tax advisor before relying on it.
| Issue | What applies | Usually handled by | Source |
|---|---|---|---|
| Estimated tax at closing (nonresident sellers) | A nonresident individual, estate or trust selling New Jersey real property makes an estimated Gross Income Tax payment at closing: the gain times the highest rate, but not less than 2% of the consideration, even without a gain. The county does not record the deed without the GIT/REP form. Nonresident individuals, estates and trusts. Resident sellers certify residency on GIT/REP-3 instead. | Seller signs the form; the settlement agent files it with the deed | NJ Division of Taxation, TB-57(R) (rev. 06/26) Checked September 30, 2026 |
| Claiming the 1031 exemption | When the gain is not recognized under IRC §1031, the seller claims exemption from the estimated payment in box 7a of GIT/REP-3 (box 7b if only like-kind property is received) and acknowledges that a New Jersey return is due if the exchange does not ultimately qualify. If a deferred exchange is voided, the form's instructions put a filing on the qualified intermediary: GIT/REP-1 and a 2% payment on the total consideration with an NJ-1040-ES voucher. Nonresident sellers in a 1031 exchange; cash or other non-like-kind property received is not covered by the exemption. | Seller, settlement agent, and the qualified intermediary if the exchange is voided | NJ GIT/REP-3 and instructions (8-25) Checked September 30, 2026 |
| Realty transfer fee | New Jersey's realty transfer fee is graduated by the consideration in the deed and is the seller's statutory responsibility. Additional fees apply above $1,000,000 for certain property classes, including a 1% fee the Division's FAQ places on the buyer. No exemption for exchanges appears in the fee forms reviewed; an exchange sale is priced like any other sale. Every deed; rates and the over-$1,000,000 fees depend on consideration and property class. | Settlement agent, under the contract's allocation | NJ Division of Taxation, Realty Transfer Fee FAQ; RTF-1EE (rev. 8/7/25) Checked September 30, 2026 |
Federal rules, New Jersey paperwork
New Jersey does not have its own like-kind exchange rules. Whether an exchange qualifies is decided under IRC §1031 and Treas. Reg. §1.1031(k)-1: the 45-day identification period, the 180-day exchange period, a qualified intermediary holding the proceeds, and like-kind real property held for investment or business use on both sides. The guide to how a 1031 exchange works covers those rules.
What New Jersey adds happens at recording. Every seller gives the settlement agent a GIT/REP form, and the county clerk will not record the deed without it. Which form, and whether money is due, depends on whether the seller is a New Jersey resident and whether the gain is recognized.
Nonresident sellers: the 2% payment and the 1031 exemption
A nonresident individual, estate or trust selling New Jersey real property normally makes an estimated income tax payment at closing: the gain times the highest New Jersey rate, but never less than 2% of the consideration in the deed, even if there is no gain (TB-57(R)).
An exchange changes that. When the gain is not recognized under §1031, the seller claims exemption on GIT/REP-3, box 7a (or 7b when only like-kind property is received). In signing it, the seller acknowledges that if the exchange does not ultimately qualify, a New Jersey return is due for the year of sale reporting the gain.
Two details are worth knowing before closing:
- Cash or other property taken out of the exchange is not covered. For the non-exempt amount, the GIT/REP-3 instructions give two choices: pay 2% of it at recording, or make an estimated payment on Form NJ-1040-ES after recording.
- If a deferred exchange is voided, the qualified intermediary has a filing. The instructions say the intermediary must complete GIT/REP-1 and remit 2% of the total consideration with an NJ-1040-ES voucher. Ask any intermediary you are considering how it handles this.
Resident sellers certify residency on GIT/REP-3 and make no estimated payment at closing. They report any recognized gain on their New Jersey return as usual.
The realty transfer fee is still due
New Jersey's realty transfer fee is graduated by the consideration in the deed, and the Division of Taxation states that the seller is responsible for it. Deeds over $1,000,000 for certain property classes carry additional fees, including a 1% fee that the Division's FAQ places on the buyer. We found no exemption for exchanges in the fee forms. Budget for the fee on your sale, and on any New Jersey replacement purchase over $1,000,000, as you would on an ordinary sale.
What to have ready before closing
| Item | Who prepares or signs it | When |
|---|---|---|
| Exchange agreement | You and the qualified intermediary | Before the deed is delivered |
| Assignment of the sale contract and written notice to the buyer | You, the intermediary; notice goes to the buyer | On or before closing |
| GIT/REP-3 with box 7a or 7b (nonresidents) or residency certification (residents) | You sign; the settlement agent files it with the deed | At closing |
| Closing instructions directing net proceeds to the intermediary | The intermediary, to the settlement agent | Before funds are disbursed |
| RTF-1 affidavit of consideration | Settlement agent, with your signature | At recording |
The checklist for closing professionals sets out the same handoff for your settlement agent. The deadline calculator gives the day 45 and day 180 dates, and the earlier tax-return cutoff, once you have a closing date.
Buying outside New Jersey
Nothing in the New Jersey forms we reviewed requires annual reporting when the replacement property is in another state, and we found no rule like California's Form 3840. A nonresident's claim on GIT/REP-3 is still tied to the exchange qualifying federally. The replacement state's own rules then apply to the purchase: see Florida, Pennsylvania or New York.
An illustration
Questions New Jersey sellers ask
I live outside New Jersey. Do I owe New Jersey money at closing if I am doing a 1031 exchange?
Not on the exchanged amount, if you claim the exemption on GIT/REP-3 and the exchange qualifies. Any cash or other property you receive is not covered by the exemption. If the exchange later fails, a New Jersey return reporting the gain is due.
Who completes the GIT/REP paperwork, my attorney or the intermediary?
You sign it; your settlement agent files it with the deed. The intermediary's own filing obligation arises if a deferred exchange is voided.
Does New Jersey charge a transfer fee on an exchange?
Yes. The realty transfer fee applies to the sale as it would to any sale, and higher-value deeds carry the additional fees described above.
Can I exchange into property in another state?
Yes, as far as federal law is concerned: real property in the United States is like-kind to other real property in the United States. Talk to your tax advisor about how New Jersey will treat the deferred gain when the replacement property is eventually sold.
Is it too late if my closing is this week?
Possibly not, if the deed has not been delivered and you have not received the proceeds. See closing soon without an exchange in place.
Related
Sources
- NJ Division of Taxation, TB-57(R): Nonresident sellers of NJ real property (rev. 06/26) (checked September 30, 2026)
- NJ Division of Taxation, GIT/REP-3 Seller's Residency Certification/Exemption and instructions (8-25) (checked September 30, 2026)
- NJ Division of Taxation, GIT/REP frequently asked questions (checked September 30, 2026)
- NJ Division of Taxation, Realty Transfer Fee FAQ (checked September 30, 2026)
- Treas. Reg. §1.1031(k)-1 (deferred exchanges; qualified intermediary safe harbor) (checked September 30, 2026)
Discuss your New Jersey exchange
Tell us the property's county, whether you are a New Jersey resident, and the expected closing date. The exchange has to be in place before the deed is delivered.
Discuss your New Jersey exchange