What Is the “Mansion Tax”?
The New Jersey Mansion Tax is a transfer tax that applies when certain classifications of real estate are transferred for 1 million dollars or more. It is collected at closing and must be paid before the deed can be recorded.
The tax applies to the sale/transfer of (a) residential homes, (b) commercial properties (including office and retail buildings, warehouses, farmland, but excluding industrial properties and vacant land) and (c) ownership interests in entities (LLCs, corporations, partnerships) that own such real estate (“Controlling Interest Transfer Tax”).
What changed?
- On June 30, 2025, the new provisions were signed into law, revising New Jersey’s Mansion Tax and Controlling Interest Transfer Tax (collectively the “Tax”).
- The provisions took effect July 10, 2025 for real estate contracts executed that day or later.
- Prior to the change, the Tax was a flat 1% tax on the purchase price and was paid by the Buyer for purchases over 1 million dollars.
- Going forward, the Tax will be a tiered rate structure starting at 1% for properties over 1 million dollars and rising up to, and capped at, 3.5% for properties over 3.5 million dollars.
- MOST IMPORTANTLY, the obligation to pay the tax has shifted from the buyer to the seller.
Rate Structure.
As such, for all sales subject to the Tax going forward, the Seller shall pay a tax based upon the sales price as follows:
- $1M–$2M → 1%
- $2M+–$2.5M → 2%
- $2.5M+–$3M → 2.5%
- $3M+–$3.5M → 3%
- Over $3.5M → 3.5%
Grace Period.
Contracts executed prior to July 10, 2025, are subject to the previous 1% “flat-tax” rate if the deed is recorded by November 15, 2025.
Practical Impacts.
- Sellers need to budget for higher closing costs, particularly for properties above 2 million dollars. The shift means more tax exposure for sellers. Sellers must also be cognizant of the effect of small price increases over any threshold (e.g., $1.99M → $2.01M will double the Tax.)
- Buyers may see somewhat more favorable terms in negotiations since they no longer will have to pay the Tax, which could influence pricing.
- For pending transactions: check whether the transaction is subject to the 1% “flat-tax” rate. Timing is critical. Contracts executed before July 10, 2025 must have a recorded deed before November 15, 2025.
If you have questions or concerns about this or any other real estate matter, please contact Jason Hawrylak at (908) 827-5537 or .
