New Jersey Increases Tax Rates on Certain High-Value Real Estate Transactions, and Shifts Responsibility for “Mansion Tax” from the Buyer to the Seller

As part of the State of New Jersey’s new budget, (i) tax rates will increase on certain high-value real estate transactions, and (ii) responsibility for the State of New Jersey “Mansion Tax” will shift from the Buyer to the Seller.

Multimillion dollar real property sales in New Jersey will be subject to higher fees. The tax used to be paid by homebuyers, who were charged a 1% transfer tax upon buying a home worth $1 million or more. Taking effect on all agreements beginning on July 10, 2025, this new bill will shift the burden of this tax from property buyers to sellers.

This bill also changes the transfer tax rates on more expensive real property sales. For sales worth $1 million to $2 million, the tax remains at 1%. However, beginning at sales between $2 million and $2.5 million, the fee goes up to 2%. It then increases to 2.5% for sales between $2.5 million and $3 million. From $3 million to $3.5 million, it increases again to 3%. And finally, for properties sold for $3.5 million or more, the rate tops out at 3.5%.

This new tax applies to residential real estate, as well as commercial properties, farm properties, and other forms of real property, as well as property interests. There are exemptions to the tax, for entities which are deemed to be tax-exempt under the IRS, as well as for incidental transfers of property due to corporate acquisitions and mergers.

Lori C. Duffy, Esq. handles commercial and residential real estate matters and is available to help answer any specific questions you may have regarding these changes to New Jersey law.  Please contact Ms. Duffy with any questions.