NJ Mansion Tax Changes 2025: What Sellers Need to Know

The landscape of real estate transactions in New Jersey has recently shifted with key amendments to what is commonly known as the “mansion tax,” officially the Realty Transfer Fee (RTF). As of July 10, 2025, sellers of high-value residential properties will now bear the responsibility for paying this fee, and new progressive tax rates have been introduced for properties sold for $2,000,000 or more. At Zager Fuchs, our Real Estate Law practice is closely following these developments to provide our clients with the most up-to-date guidance.

New Jersey’s New Mansion Tax

In short, the new law is a significant overhaul of New Jersey’s “mansion tax,” completely changing the financial dynamics for high-value real estate transactions. The key takeaway is a complete reversal of who pays, along with a dramatic increase in the amount owed for the most expensive properties.

Previously, the buyer was responsible for a flat 1% fee on properties over $1 million. Now, as of July 10, 2025, that obligation has shifted entirely to the seller. On top of that, the fee is no longer a flat rate. Instead, a new, tiered progressive structure has been implemented for properties selling for over $2 million, with rates climbing as high as 3.5%. This new rate is applied to the entire sale price, not just the amount above a certain tier, making the tax a much larger factor in the overall cost of the sale.

What Changed in 2025

• Old Law: Buyers paid a flat 1% tax on properties over $1 million.
• New Law: Sellers pay the RTF, with progressive rates applied to the entire sale price of properties $2M+.

Progressive Rates (Residential & Certain Commercial Properties)

• $1M–$2M: 1%
• $2M–$2.5M: 2%
• $2.5M–$3M: 2.5%
• $3M–$4M: 3%
• $4M+: 3.5%

Who Is Affected?

Not Just Mansion: The “Mansion Tax” Applies to More Than Just Homes

The “mansion tax” name is misleading — it impacts far more than luxury homes. While the name “mansion tax” may evoke images of luxury residential properties, the law itself, known as the supplemental Realty Transfer Fee (RTF), has a much broader application. The recent changes to this fee, which became effective on July 10, 2025, impact not only high-value homes but also certain commercial real estate transactions in Monmouth and Ocean Counties and throughout the state.

The tax applies to transfers of specific New Jersey property classes, including:

• Class 2: Residential properties
• Class 3A: Farmland with a residential structure
• Class 4A: Commercial properties (e.g., office buildings, retail spaces, warehouses)
• Class 4C: Cooperative units

This means that owners of a variety of high-value commercial assets now face the same increased tax rates and new payment obligations as sellers of residential homes. For sellers, whether you’re offloading a multi-million-dollar office building or a coastal family home, it’s essential to understand how these new progressive rates will affect your net proceeds at closing.

How It Impacts Sellers

For sellers, the new rules mean:

• Greater closing costs — Net proceeds shrink significantly.
• Pricing strategies matter — Crossing a tax threshold (even by a small amount) can trigger a higher rate.
• Negotiation dynamics shift — Buyers may leverage the seller’s new tax burden in deal discussions.

Case Studies

Commercial Sale in Ocean Township: A Class 4A building sold for $3.1M. Under old rules, the buyer paid 1% ($31,000). Under the new law, the seller owed 3% of the full sale price ($93,000+), forcing renegotiation.

Residential Sale in Rumson: A home listed for $2.49M received an offer at $2.51M. That small $10K bump pushed the sale into the 2.5% tax tier — increasing the seller’s tax bill by over $12,000 and cutting into net proceeds.

Implications for Buyers

While buyers are no longer directly responsible, they may see:
* Stronger seller resistance to price negotiations.
* Indirect costs passed on through higher listing prices.
* Slower deal-making, as sellers evaluate tax impacts before accepting offers.

What Sellers Can Do

If you’re selling a high-value home or commercial property in New Jersey:
* Consult early with your attorney to calculate tax exposure.
* Price strategically to avoid costly tax thresholds.
* Prepare for negotiation — buyers know sellers are absorbing higher costs.

The 2025 mansion tax changes add significant complexity to New Jersey real estate transactions.
Don’t let unexpected costs catch you off guard. Contact Andrew Krantz at Zager Fuchs today for guidance on navigating the new rules and protecting your bottom line.