With summer 2025 in full swing, the Jersey Shore housing market has weathered the threat of tariffs, higher interest rates, weather, tourism and other seasonal factors. Potential buyers eye the opportunity to own a slice of paradise, and sellers continue to capitalize on their property investments. Last week, as people were gearing up for the July 4th holiday, Governor Murphy approved sweeping changes to the State’s so-called “Mansion Tax” that could create lasting ripples for both buying and selling strategies at the Shore and throughout the State.
Most notably, the recent changes modified the Mansion Tax rate structure and payment obligations. These amendments include the introduction of a graduated rate structure in the fees that will be paid for properties sold for over $2 million and have shifted the Mansion Tax payment responsibility from buyers to sellers.
Here’s what you need to know:
Background:
New Jersey imposes a Realty Transfer Fee (“RTF”) on the seller of real property for recording a deed for the sale. The RTF is calculated based on the amount of consideration recited in the deed (or in certain instances, the assessed valuation of the property conveyed divided by the Director’s Ratio as published by the New Jersey Division of Taxation each year). The RTF applies to every conveyance of title to real property in New Jersey, unless the deed or transfer meets certain statutory exemptions.
The Mansion Tax is a supplemental fee paid in addition to the RTF and is imposed on certain classes of property when the consideration exceeds $1 million.
The Mansion Tax applies to all deeds where the land conveyed is classified as any of the following:
- Class 2 residential;
- Class 3A where the property is a farm (but only if the farmland contains a building or structure intended or suited for residential use);
- Class 4A commercial (other than industrial or apartment); or
- Class 4C cooperative units.
Historically, sellers were responsible for the RTF and buyers were responsible for the Mansion Tax which was set at a flat 1%. However, the amount paid and the payment obligations have switched under the recent amendments.
New Changes:
- Now, a graduated rate, rather than a flat rate of 1%, is as follows:
- 1% of total consideration if in excess of $1 million but not in excess of $2 million;
- 2% of total consideration if in excess of $2 million but not in excess of $2.5million;
- 2.5% of total consideration if in excess of $2.5million but not in excess of $3 million;
- 3% of total consideration if in excess of $3 million but not in excess of $3.5 million; and
- 3.5% of total consideration if in excess of $3.5 million.
- Sellers rather than Buyers, are now responsible for payment.
There will be a temporary refund period as the new changes take effect:
The State is offering a temporary refund period while the new changes take effect, wherein sellers can receive partial relief from tax payment obligations for transfers made on or after July 10, 2025. Under this provision, if: 1. a deed has a consideration in excess of $2 million; 2. the parties to the transaction have fully executed a contract prior to July 10, 2025; and 3. the deed is recorded on or before November 15, 2025, the seller may request a refund for any amount of the graduated percent fee paid in excess of the flat rate of 1% by filing a claim with the Division of Taxation within one year following the recording date of the deed. Certain Mansion Tax exemptions remain unchanged and will continue to remain in effect, these include the following:
- Certain property classes: vacant land, qualified farm property, industrial properties, apartments, public property;
- Exempt organization determined by federal Internal Revenue Service/Internal Revenue Code of 1986, 26 U.S.C. s. 501;
- Incidental to corporate merger or acquisition, equalized assessed valuation less than 20% of total value of all assets exchanged in merger or acquisition;
- Intercompany transfer between combined group members as part of the unitary business.
A general overview of the RTF can also be found here.
Kleinbard’s Real Estate and Finance attorneys are available to help property owners navigate these changes and answer questions about current and future property ownership. For more information, please contact Christopher Sullivan, or Kelly Anne Donohoe.
