The Homestead Rebate and Your Home Sale
The Homestead Rebate is a reduction in an eligible homeowner’s New Jersey property tax bill. There are a particular set of requirements to qualify. See NJ Division of Taxation – Homestead Benefit Program – Eligibility Requirements (state.nj.us).
It is important for you to determine whether you are eligible for the credit.
According to the State of New Jersey Division of Taxation, to be eligible for the program you:
1) Must have been a New Jersey resident for the year in which you are seeking benefits
2) Owned and occupied a home during this time
3) Paid your property taxes on that home
4a) Earned $150,000 or less and were aged 65 and over or were blind or disabled, or
4b) Earned $75,000 or less and were aged 65 and under and were not blind or disabled.
If you qualify, the rebate is paid to whomever owns the property on the date of distribution. There is no law requiring a new owner to pass the credit to the previous owner, who secured the rebate. Therefore, if an eligible homeowner sells their home and does not notify the New Jersey Division of Taxation to request payment by check, the new homeowner, or buyer, will receive the tax reduction. The benefit might be lost to the seller.
This is one of many reasons why it is important to have an attorney represent you throughout the selling process. Your attorney will draft a provision in your contract that specifically contemplates a scenario where you cannot receive the rebate by check. For example, If the seller knows the amount of the rebate, then the amount can be accounted for at closing in the closing disclosure statement. This document will apply the amount as a credit to the seller and a debit to the buyer. If this is not an option, specific language can be added to your contract for sale stating that a post-sale reimbursement will be made to the seller and that such an agreement survives the closing.
If you know that you are due a Homestead Rebate, talk to your attorney about how you want to handle receipt of that credit before selling your home.