Seller’s Residency Certificate - Will My Children Pay Taxes, If I Give Them My Home?

Seller’s Residency Certificate - In a general warranty deed, a seller states that the transfer amount is one dollar and notarizes it. It is then sent to the county clerk. However, in this New Jersey example, the deed was sent back because a Seller’s Residency Certification form was required.

There is often confusion about the right method of transferring a deed and the potential consequences. When a home is transferred as a gift, property taxes may not be imposed, depending on state law. This is known as a homestead tax exemption for property taxes. The homestead exemption is generally a dollar amount or percentage of the property value that’s excluded, when calculating property taxes.

The amount or percentage depends on the state. Every state also has specific eligibility requirements for the exemption. In some states, every homeowner gets the tax exemption, while in other states, eligibility depends on income level, property value, age or if you’re disabled or a veteran.

Nj.com’s recent article entitled “Will changing this home’s deed cost us any money?” explains that in New Jersey, the Seller’s Residency Certificate addresses whether there should be income tax withheld, or whether an estimated tax payment should be made, in connection with the transfer.

In Georgia, to be granted a homestead exemption, an individual must occupy the home, and the home is considered their legal residence for all purposes. However, those away from their home because of health reasons will not be denied homestead exemption in the state.

When the transfer appears to be a gift in the New Jersey example, no withholding or estimated taxes should be required.

However, it’s important to understand that transfers of real property for consideration of less than $100 also shouldn’t trigger a realty transfer fee. If there’s a mortgage encumbering the property, and if you will assume that mortgage obligation, the amount of the outstanding mortgage balance would be treated as consideration.

However, if there is no mortgage encumbering the property and presuming that the transfer in the example above is from the mother-in-law to her daughter and her husband is a gift, there should be no realty transfer fee charged on the transfer.

Note in New Jersey, when the deed is re-record, it should include, in addition to the Seller’s Residency Certificate, an Affidavit of Consideration.

Reference: nj.com (April 24, 2021) “Will changing this home’s deed cost us any money?”