1031 Exchange & DST Investing in New Jersey
New Jersey taxes top capital gains at 10.75% and conforms to federal Section 1031, so a qualifying exchange defers a substantial combined tax burden. Nonresident sellers must also address the state's estimated Gross Income Tax payment at closing.
State tax treatment of a 1031 exchange
New Jersey conforms to federal Section 1031, so a qualifying like-kind exchange defers New Jersey Gross Income Tax on the gain. Capital gains are taxed as ordinary income, with a top marginal rate of 10.75% on income over $1 million.
Nonresident sellers are generally required to make an estimated Gross Income Tax payment at closing under the GIT/REP forms, calculated as the greater of 2% of the consideration or 8.97% of the net gain. A properly structured exchange may allow the seller to claim a nonrecognition exemption. New Jersey does not impose a separate clawback on deferred gain.
Market snapshot
Northern New Jersey is one of the tightest industrial and logistics markets in the nation, driven by the Port of New York and New Jersey, the Meadowlands, and dense last-mile distribution demand. The Gold Coast in Hudson County, including Jersey City and Hoboken, supports a deep high-rise multifamily market tied to the Manhattan economy.
Industrial, logistics, and multifamily assets draw the most 1031 replacement capital, complemented by the state's life-sciences and pharmaceutical corridor. Strong rents and constrained supply keep investor demand high across the northern counties.
Why 1031 & DST investors look here
- A 10.75% top state rate plus federal capital gains and net investment income tax makes deferral especially valuable in New Jersey
- Owners of northern New Jersey multifamily and industrial property often want to exit active management
- DST and 721 structures can diversify a concentrated position and support estate planning without a taxable sale
Replacement-property options
New Jersey exchanges do not require in-state replacement property. Accredited investors frequently identify DST interests, 721 UPREIT contributions, or Opportunity Zone investments elsewhere, trading a hands-on New Jersey building for diversified, professionally managed real estate. These vehicles are illiquid, involve market and sponsor risk, and are available only to accredited investors.
Frequently asked questions
Does New Jersey tax a 1031 exchange?
No. New Jersey conforms to federal Section 1031, so a qualifying like-kind exchange defers New Jersey Gross Income Tax on the gain along with the federal tax.
Can I exchange New Jersey property for out-of-state DSTs?
Yes. The replacement property does not need to be in New Jersey, so a New Jersey property can be exchanged into DST interests holding real estate in other states, subject to accredited-investor eligibility.
What is the New Jersey nonresident exit tax on a sale?
It is an estimated Gross Income Tax payment, the greater of 2% of the sales price or 8.97% of the net gain, collected at closing from nonresident sellers. A qualifying 1031 exchange may support a nonrecognition exemption on the GIT/REP forms.
Gerald F. “Jerry” Baker, III — Founder & Managing Principal, Baker 1031 Investments · FINRA Series 22 / 63 · SIE. Read full bio →
State tax treatment is general and changes frequently; this page is educational and is not tax, legal, or investment advice. Confirm current state and local rules with your own CPA and attorney. Securities offered through Aurora Securities, member FINRA/SIPC. Real estate investments involve risk, including possible loss of principal.