New Jersey Mansion Tax 2025: Complete Guide to the New Graduated Percent Fee

How Bill S4666 Transformed New Jersey’s Mansion Tax Structure

Starting July 10, 2025, New Jersey reshaped its longtime “mansion tax” through broad updates. Since its start in 2004, no adjustment has carried such weight as this one. High-end property deals now face a different financial structure across the state. While past versions targeted luxury homes to some extent, the revised system applies more rigorously. Change arrived quietly, yet its reach runs deep into real estate practices. What once seemed minor now holds greater consequence under current rules.

Effective June 30, 2025, Governor Phil Murphy enacted Bill S4666/A5804. Responsibility for the tax now lies with the seller instead of the buyer, thus ending a policy held since the early 1990s. A new pricing ladder replaces the old fixed charge, applying higher percentages as sale prices rise beyond $2 million. For top-tier deals, levies climb gradually until hitting 3.5 percent.

Even though it is called a “mansion tax,” the rule reaches beyond grand luxury properties. Across places such as Ocean and Monmouth Counties, where house prices often go above $1 million, standard detached houses now meet the criteria, especially near water or along coastal areas. With rising market values, homeowners might feel more aware of potential costs, helping them plan with confidence under the updated rules.

Notably, the tax once known as the “Supplemental Fee to the Realty Transfer Fee” now carries the official name “Graduated Percent Fee.” Though distinct, it runs alongside the existing Realty Transfer Fee paid by sellers during property transfer. Because of this change, sellers and buyers should consider planning strategies, such as timing transactions or structuring deals, to mitigate the impact of higher mansion taxes. This update alters neither timing nor structure; it simply redefines how the charge is labeled within legal frameworks.

What Changed in the New Jersey Mansion Tax Law 2025?

Starting mid-July 2025, two significant updates altered the real-world operation of New Jersey’s mansion tax. Though separate in design, their combined impact shifted enforcement and application details noticeably.

Now it falls to sellers to cover the cost, shifting from prior practice. Earlier, right up until July 9, 2025, that duty sat with the buyer. Exactly one percent was due at closing if the home met the criteria. The updated rule transfers full liability directly to the seller by legal mandate. There is no room for discussion once paperwork reaches official channels. Recording gets blocked flat if the payment does not come through, verified before any filing. This change aims to make sellers feel more in control of their financial responsibilities in New Jersey real estate deals.

A new pricing model has taken effect for more expensive homes. Though transactions from $1,000,001 up to $2,000,000 remain subject to a 1 percent charge, it is now covered by the seller. When deals fall within the $2,000,001 to $2,500,000 range, they carry a 2 percent cost. Properties sold between $2,500,001 and $3,000,000 face a levy of 2.5 percent instead. For homes priced above three million but under three point five million dollars, the tax rate stands at three percent. Sales exceeding that upper limit face a slightly higher levy of three and a half percent. Understanding these brackets can help agents advise clients on pricing strategies to optimize tax outcomes.

A key detail many misunderstand involves the way these rates take effect. Instead of increasing step by step like income taxes, one flat rate covers every dollar of the sale price when it lands in a bracket. For example, a house going for two point six million dollars: the 2.5 percent charge hits the complete sum, even what’s below two point five million. This means that properties priced just above a bracket threshold can face significantly higher taxes, so agents and clients should prepare for potential cost jumps when pricing or negotiating sales near these markers.

How to Calculate the NJ Mansion Tax: Examples by Price Range

Looking at actual figures helps clarify the effect of the updated tax method. When set beside earlier rules, the change appears sharper – particularly on more expensive properties.

For a $1.5 million home, the total tax amount itself has not changed. Under the old law, the buyer paid $15,000 at closing, based on a 1 percent rate. Under the new law, the seller pays the same $15,000. The only difference is who writes the check.

For a $1.5 million house, the tax burden remains untouched. Previously, at closing, buyers covered $15,000 in taxes due to a 1 percent tax rate. Now, sellers take responsibility for that payment.

A seaside home priced at $2.4 million reveals an altered financial picture. Earlier, the purchaser contributed $24,000 upon completion, exactly 1 percent of the total. With revised terms, responsibility now rests with the seller, who must cover a 2 percent tax on the full value: $48,000. This doubles prior costs; what was once shared now falls solely on the seller.

At higher prices, the effect grows stronger. A $3.1 million beach house once required the buyer to cover $31,000 under a 1 percent fee. Today, that charge shifts entirely to the seller, who pays 3 percent – $93,000. This shift marks a 200% increase, placing the entire burden on the seller instead.

A 4 million dollar luxury home makes a greater shift. Previously, buyers covered $40,000 in costs. Now, sellers shoulder 3.5 percent of the total price of $140,000. This shift marks a 250% increase, introducing a much heavier burden at closing for sellers.

The tax doesn’t take the place of any existing charge. Alongside it sits the regular New Jersey Realty Transfer Fee, a payment sellers must make regardless, typically ranging from 0.4 percent to 1 percent of the sale price. Higher-priced homes now face steeper overall transfer costs than before, and those fees add up.

NJ Mansion Tax “Dead Zones”: How Pricing Thresholds Affect Property Values

A shift to a flat tax rate has led some market observers to describe a gap where prices hesitate, dubbed a “dead zone.” This happens because moving into a higher bracket applies the steeper rate across the full amount, not only the excess beyond the cutoff.

When a home sells for exactly $2 million, the tax is 1% ($20,000). Raising the price by just twenty thousand pushes it higher. Now, two percent hits every dollar of that new amount ($40,000). That small increase in value doubles the tax owed.

At each pricing level, silent gaps lurk where deals vanish. Jumping into the next range means tax bills spike by huge amounts overnight. Even small bumps in sale value trigger high costs without warning.

This setup shapes how prices are set in practice. Rather than crossing a boundary, sellers sometimes choose to stay just beneath it, setting a value at $2.49 million instead of going above $2.50 million. The next level might mean over $12,000 extra in taxes, which can erase most of what they would gain by accepting a better offer. Because of this shift in behavior, homes near but below those lines often attract stronger interest. Buyers adjust their approach too, aware that pushing the cost up even a small amount affects the seller’s outcome.

Which Properties Qualify for New Jersey’s Mansion Tax?

Clearly, residential units count under the rules. Homes meant for one to four families, along with condos and housing cooperatives, fall into Class 2. When farmland holds a home, even Class 3A farms face taxation. Business sites often apply too. Buildings used for shops, offices, or combined purposes fit into Class 4A. If these structures serve commerce rather than industry, then the mansion levy follows.

Not every type of property falls under the tax rules. Empty plots without structures are an exception. Buildings meant for five or more families skip the charge, regardless of the selling cost. Factories labeled as Class 4B stay outside the rule. Land used only for farming avoids it, too, provided there is no home on site. Places granted special farm status also escape the fee. Burial grounds fall into this group as well.

What stands out is how inaccurate the term “mansion tax” really is. The update reshapes who pays, not just which buildings are involved. Far beyond upscale houses, those selling commercial spaces such as shops or offices tagged as Class 4A, may confront steep transfer fees now.

NJ Mansion Tax Exemptions: Who Qualifies and How to Claim Them

A few types of property transfers escape the mansion tax, even if they otherwise qualify. Though New Jersey statutes allow certain exclusions based on how a transaction unfolds, failing to assert them correctly means giving up the benefit.

Common exempt transfers include those between spouses. This includes transfers made during the marriage as well as transfers recorded within 90 days of a final divorce decree. Transfers between parents and children are also exempt, as are transfers from an estate to beneficiaries or heirs. Conveyances to government entities are excluded, along with transfers involving tax-exempt organizations such as charities, religious institutions, and qualifying non-profits.

Some low-cost home deals might avoid the fee. Transfers required by a judge, such as those from a ruling or lawsuit, also do not get taxed.

Not every eligible case gets relief without action. Claiming the benefit requires filing Form RTF-1EE – officially called the Affidavit of Consideration for the Graduated Percent Fee. Accuracy matters when filling out the document. Attaching it to the deed happens just before recording. Missing details or skipping steps risks rejection. Without the correct paperwork, the county clerk might demand tax payment prior to processing, regardless of eligibility.

Controlling Interest Transfer Tax (CITT) Changes

Not only were outright property transactions affected in 2025. The rules governing the sale of entities tied to commercial buildings also shifted, altering how the Controlling Interest Transfer Tax applies under new conditions.

A shift occurs once ownership crosses the half mark in firms holding premium-grade buildings worth over a million dollars. Before recent updates, results followed a clear pattern. Payment landed at one percent across deals, while vendors leaned on corporate takeovers instead of recorded transactions to bypass higher residential levies.

With the recent changes, responsibility shifts to sellers for the CITT. The calculation follows a tiered system mirroring the mansion tax setup. Property value determines the exact percentage, starting at 1 percent and climbing as high as 3.5 percent. Full payment applies to the entire amount linked to control shifting hands.

Investors and builders now find limited shelter in LLCs or corporations when transfer taxes come due. Regardless of whether the deal moves real estate directly or shifts control through ownership stakes, how it is taxed has changed. Closing expenses rise sharply for high-value business deals, meaning those charges shape bargaining tactics and negotiations.

Put simply, entity sales no longer offer a workaround. New Jersey has deliberately equalized the tax consequences so that substance, not structure, controls the outcome.

Strategies to Minimize NJ Mansion Tax Impact When Selling Property

Changes to the mansion tax are reshaping deal pricing, negotiation tactics, and structures. Overlooking this shift may lead to unwelcome outcomes when closing on a property. What once seemed minor now carries substantial weight in final agreements.

Pricing choices often shift when the mansion tax is introduced early on. That extra cost tends to reshape what sellers actually take home, particularly when values hover around cutoff levels. Hitting a lower bracket by setting a slightly reduced price might be more advantageous for the seller. A real estate lawyer can run comparisons across different sale prices, revealing how much is truly gained or lost. Seeing those numbers laid out helps shape smarter listing decisions going forward.

Since sellers lose a chunk of profit to the tax, they might resist lowering prices, skipping repairs, or offering closing help. Instead of pushing for discounts, buyers sometimes agree to handle part or all of the mansion tax to stand out, especially in today’s competitive market. Contracts must lay out tax duties ahead of time, leaving no room for last-minute disagreements once the sale is finalized.

Teaming up with seasoned experts holds greater weight. Calculating full closing expenses right away helps. This covers the regular Realty Transfer Fee along with the mansion tax. Trying out various pricing situations might expose hidden strains caused by the layered system. For deals that were negotiated around the effective date of the law, careful attention should be paid to when the deed will be recorded and which version of the law applies. Astute planning paired with straightforward guidance keeps expensive errors at bay amid these shifting conditions.

How the New Jersey Mansion Tax Affects Home Buyers

Despite skipping the upfront mansion tax payment during closing, purchasers face other consequences under the updated rule. Although they are not handing over cash at settlement, they still feel the effects of the revised legislation. When sellers assume tax responsibilities, they sometimes increase their quoted price, especially for pricier listings. Potential buyers face higher upfront costs than before, despite not seeing a separate charge at settlement.

When tax obligations grow, sellers might be tougher to negotiate with. Facing higher costs, they may resist offering credits or covering repair requests after the inspection. A larger tax burden reduces their take-home pay, limiting flexibility once offers come in.

When homes fall below critical thresholds, they often attract heightened attention. Market dynamics near the tax brackets may also shift buyer behavior. Properties priced just below key cutoff points may attract more interest and more aggressive bidding. If buyers recognize that sellers have a strong incentive to avoid crossing into the next tax bracket, they may push for a more budget-friendly closing. Increased competition in those price ranges can make It makes it more challenging for buyers to finalize a deal without favorable terms.

Common Questions About the NJ Mansion Tax (2025)

Who pays the mansion tax in New Jersey now?

As of July 10, 2025, the seller is legally responsible for paying the mansion tax (officially called the Graduated Percent Fee). Previously, buyers paid this tax at closing.

What are the new mansion tax rates in NJ?

The rates are tiered based on sale price: 1% for $1M-$2M, 2% for $2M-$2.5M, 2.5% for $2.5M-$3M, 3% for $3M-$3.5M, and 3.5% for sales over $3.5M. The rate applies to the entire sale price.

Is the mansion tax the same as the Realty Transfer Fee?

No. The Realty Transfer Fee (RTF) has existed since 1968 and is a separate fee. The mansion tax (Graduated Percent Fee) is an additional tax that applies to sales over $1 million. Sellers pay both.

What properties are exempt from the NJ mansion tax?

Exempt properties include vacant land, multi-family buildings with 5+ units, industrial properties, and agricultural land without a residence. Certain transactions, like family transfers and estate distributions, may also be exempt.

How does the mansion tax affect commercial property sales?

Class 4A commercial properties are subject to the same mansion tax rates. Additionally, sales of controlling interests in entities owning commercial property are subject to the Controlling Interest Transfer Tax (CITT) at the same tiered rates.

Can the buyer still pay the mansion tax?

While the seller is legally responsible, parties can negotiate for the buyer to cover some or all of the cost. This must be addressed in the purchase agreement; however, the county clerk requires the seller to pay a recording fee to record the deed.

Get Expert Legal Guidance on NJ Mansion Tax Matters

Selling a property over $1 million in Ocean County or Monmouth County? Bronzino Law Firm helps clients navigate New Jersey’s mansion tax requirements, structure transactions strategically, and claim eligible exemptions. Our attorneys serve communities throughout Toms River, Brick, Point Pleasant, Wall Township, Asbury Park, Red Bank, and surrounding areas. Contact us at (732) 812-3102 for experienced legal representation in your real estate matter.