Understanding New Jersey’s New Mansion Tax: What Buyers and Sellers Should Know

On June 30, Governor Murphy signed the FY 2026 New Jersey Budget into law, which includes a Supplemental Fee to the Realty Transfer Fee. This new tax commonly referred to as a "Mansion Tax" will now be entirely paid by the seller and took effect on July 10, 2025.

The New Jersey real estate market has recently seen significant changes with the implementation of this new graduated mansion tax, creating a wave of questions and concerns among buyers, sellers, agents, and attorneys alike. At a LuxeLife Mastermind panel over the summer, top experts from mortgage, legal, and title fields gathered to unpack the complexities of this new tax and its impact on real estate transactions. Here’s a comprehensive overview of what you need to know to navigate this evolving landscape confidently.

What Is the New Mansion Tax?

Governor Murphy’s administration introduced a graduated mansion tax that increases the tax rate on high-value residential property transfers. Unlike the previous flat 1% mansion tax on properties over $1 million, the new tax applies a tiered rate structure that escalates with the purchase price, significantly increasing the tax burden on luxury home sales.

Despite some confusion, the buyer was generally responsible for the transfer mansion tax on contracts signed before July 10, 2025, over $1 million.  That responsibility has now shifted to the seller.

Impact on Buyers and Sellers

• Sellers face increased costs: Sellers now pay both the transfer tax and the mansion tax, which can feel like “double dipping.” For high-value homes, this can amount to tens of thousands of dollars in additional expenses.
• Negotiation dynamics: The new tax structure is influencing negotiations. Some buyers are offering to pay their own broker commissions or sharing the mansion tax burden to make offers more attractive. Sellers may consider adjusting listing prices to offset the increased tax costs.
• Market effects: The tax affects a growing percentage of transactions reflecting rising home prices. In our base market of Millburn Township, over 85% of homes sold for over $1,000,000 and were subject to additional mansion taxes. This shift may lead to more cautious buyer behavior, creative deal structuring and may have also contributed to fewer overall sales of homes subject to the additional tax.

Practical Tips for a Smooth Transaction

1. Get a Present Owner Search: Before listing or buying, conduct a thorough title and lien search to understand any existing encumbrances or tax liabilities.
2. Communicate Proactively: Keep all parties—agents, attorneys, lenders, and title companies—in the loop throughout the transaction to avoid surprises.
3. Review Contract Language Carefully: Ensure contracts clearly state who is responsible for the mansion tax and consider negotiating terms upfront to avoid disputes.
4. Plan for Timing: Submit all closing documents promptly.
5. Understand Inspection and Financing Contingencies: Clear and concise contract terms regarding inspections and mortgage contingencies help prevent deal delays or cancellations.
6. Coordinate Credits and Price Adjustments: If credits or price changes occur, notify lenders and appraisers early to accommodate underwriting and appraisal requirements.

Looking Ahead: Legislative and Market Developments

The mansion tax is just one part of a broader set of changes affecting New Jersey real estate, including increased property tax caps and potential capital gains tax adjustments. While some measures may benefit buyers by increasing affordability, the overall tax environment is becoming more complex.

Buyers and sellers should stay informed and work closely with experienced real estate advisors who understand these nuances. At LuxeLife Group, we are committed to guiding you through these changes with clarity and confidence.

If you have questions about how the new mansion tax affects your real estate plans or need expert advice on navigating New Jersey’s market, feel free to reach out to me directly at simon@luxeliferealestategroup.com or call +1 (973) 721-9228. Together, we can make your next real estate transaction a success despite the evolving tax landscape.

— Simon Westfall-Kwong
Team Leader, Realtor® | LuxeLife Group

To view this summer's panel discussion on the impacts, please click on the below link