New Jersey's Changes to the "Mansion Tax" on the Sale of High Value Properties
By: Diane Stolbach
On June 30, 2025, Governor Murphy signed into law an increase in the tax rate on the sale of all residential properties and many commercial properties with a sales price of $1.0 million or more, with limited exceptions. The law went into effect on July 10, 2025.
SELLER IS RESPONSIBLE TO PAY THE TAX
Before the new law was enacted, the Buyer was responsible to pay the tax. This obligation now shifts to the Seller.
NEW TAX RATE
The tax rate had been a flat 1% of the purchase price for sales of $1.0 million or more. As of July 10, 2025, there is an increasing rate for sales with a purchase price of $2.0 million or more:
- $1.0 million - $2.0 million 1.0%
- $2.0 million - $2.5 million 2.0%
- $2.5 million - $3.0 million 2.5%
- $3.0 million - $3.5 million 3.0%
- $3.5 million - and above 3.5%
The amount of the tax is calculated on the total purchase price not just consideration in excess of $1.0 million.
THE CHANGES HAVE IMMEDIATE EFFECT
Any deed filed on or after July 10, 2025 is subject to the increased tax and the Seller is responsible to pay the tax instead of the Buyer.
SALES CURRENTLY UNDER CONTRACT
There is a limited opportunity for a Seller to apply for a refund of the excess tax paid over the prior 1% rate.
To qualify for a refund, the Seller must: (i) pay the full tax at closing; (ii) record the deed prior to November 15, 2025; and (iii) apply to the Division of Taxation within a year.
Please note that the refund is only applicable contracts that were fully executed before July 10, 2025.
WHAT TO DO NOW:
For potential sales, determine whether the tax applies to your property and if one of the limited exemptions from paying the tax may apply.
If you are under contract, it is important to preserve the ability to qualify for a refund of the tax increase.
If you are in negotiations and the sale contract has not been finalized, the contract should address the new changes to the law, e.g., include whether the Buyer reimburses the Seller for any or all of the “Mansion Tax” that the Seller is now obligated to pay.
Our real estate and transactional group frequently works with real estate developers, professionals, buyers and sellers on their transactions. This issue could have a material financial impact and we welcome the opportunity to discuss your situation and to help you manage this impact.
