Understanding New Jersey's Mansion Tax Law Changes Effective July 2025

Governor Phil Murphy has signed New Jersey’s 2025 state budget into law, and with it comes a major change to how high-end real estate transactions are taxed. Commonly known as the “mansion tax,” the supplemental realty transfer fee on homes over $1 million is getting an overhaul that shifts the entire burden from the buyer to the seller and introduces a new graduated fee structure. This update – which takes effect July 10, 2025 – could have far-reaching impacts on New Jersey home sellers and buyers in today’s market.

Breaking Down New Jersey’s New Mansion Tax Law

Under the previous system (in place since 2004), buyers of properties priced above $1 million paid a 1% “mansion tax” at closing. Going forward, sellers will pay that fee instead – and the rate will increase for higher-priced sales. This supplemental fee (officially a Supplemental Fee to the Realty Transfer Fee) will be tiered based on the sale price.

• $1,000,000 – $2,000,000: 1% (the existing 1% rate remains, but now the seller pays it instead of the buyer)

• $2,000,000 – $2,500,000: 2% (seller-paid)

• $2,500,000 – $3,000,000: 2.5% (seller-paid)

• $3,000,000 – $3,500,000: 3% (seller-paid)

• $3,500,000 and above: 3.5% (seller-paid)

Importantly, this graduated “mansion tax” is in addition to New Jersey’s standard Realty Transfer Fee (RTF) that sellers already pay (approximately 1% of the sale price, with some variation based on price and exemptions). In other words, a high-end home seller in New Jersey will now pay the regular transfer tax plus the new supplemental fee based on the price tier. The new law applies to all sales closing on or after July 10, 2025 (contracts executed before that date may be grandfathered under the old system if closed by November 15, 2025).

Why This Change Matters (Hint: It’s Not Just “Luxury” Sellers)

When New Jersey first introduced a $1 million “mansion tax” in 2004, a million-dollar home truly was a mansion. Today, that’s often not the case. In many NJ communities (for example, towns like Short Hills, Summit, or Maplewood), a $1 million house might be a starter home for a family or a modest downsizing option for a retiree – not a palatial estate. In fact, the share of New Jersey homes selling for over $1 million has nearly tripled since 2018, rising from under 6% to over 15%. 

The takeaway: this new tax isn’t just targeting ultra-luxury mansions – it could affect a wide swath of everyday home sales and ordinary sellers across the state. Anyone selling a home above the $1M mark will need to budget for a substantial new closing cost. And even many homes below that threshold could be indirectly impacted as the market adjusts (more on that below).

What It Means for Sellers

For sellers of high-value homes, the updated mansion tax means significantly higher costs at closing. Instead of having the buyer foot a 1% fee, the seller will now owe anywhere from 1% up to 3.5% of the sale price (graduated) in supplemental transfer tax. This could amount to tens of thousands of dollars out of the seller’s proceeds. Such added costs may lead sellers to re-think their pricing and timing.

Some sellers may try to keep their listing price just under a tax threshold (e.g. $1.99M or $2.49M) to reduce the fee bracket, or they might be less willing to negotiate on price or repairs during contract talks, since their net proceeds are already reduced.

Additionally, because New Jersey is already experiencing a tight housing inventory, especially in popular areas, this change could exacerbate the supply crunch. If would-be sellers at the high end decide to hold off (to avoid the tax bite), there will be even fewer homes on the market, prolonging the inventory shortage.

What It Means for Buyers

For buyers, there is a bit of good news in this update: you no longer have to pay the 1% mansion tax at closing. A buyer purchasing a $1.5M home, for instance, will save $15,000 in closing costs compared to the old rules. This removal of the buyer’s fee could help ease the upfront cash needed to buy in the $1M+ range, ostensibly making these purchases slightly more affordable than before.

However, buyers should be aware that the overall market dynamics may shift in response to the seller now shouldering the tax. With sellers on the hook for more costs, we may see them become less flexible during negotiations – for example, they might be firmer on their asking price and less inclined to offer credits for repairs or closing costs. Sellers know they’re losing a chunk of their sale proceeds to the state, so they’ll be looking to preserve as much as possible elsewhere in the deal.

Buyers may also encounter tougher competition for homes priced just under key thresholds. A house listed at $1.95M, for example, might become even more desirable because both the seller and listing agent strategically priced it to avoid the 2% tax tier that kicks in above $2M. That could lead to multiple buyers vying for it.

It’s a classic case of a cost shift in the market: one side’s gain (buyers saving 1%) might be offset by new challenges in negotiations and selection.

Bottom Line & Next Steps

New Jersey’s updated mansion tax law is a significant change that will be felt on both sides of real estate transactions. The state’s aim is to generate revenue (the funds from these fees go into the general fund and programs like neighborhood revitalization and shore protection, but it also means buying or selling a home over $1M in New Jersey now requires new strategies and careful planning. Whether you’re a seller calculating your net proceeds or a buyer strategizing your offer, it’s crucial to understand these rules and factor them into your game plan.

If you’re curious about how New Jersey’s new mansion tax could affect your real estate plans – whether you’re looking to sell your home or purchase one – we’d love to help. As local experts who live and work here, we know the ins and outs of the market and what makes our communities such desirable places to call home. Our team has been following this tax change closely from proposal to passage, and we can provide guidance tailored to your situation. Contact the Allison Ziefert Real Estate Group at Compass today to discuss your goals and navigate New Jersey’s real estate market with an expert by your side.

View Video (Watch our quick Instagram reel explaining the New Jersey mansion tax update!)