The State of New Jersey recently enacted a law that changes the way realty transfer tax is imposed on sales of real estate in the State where the sales price exceeds $1,000,000. The law took effect on July 10, 2025, and, with a few exceptions, applies to all real estate sales otherwise subject to the realty transfer tax that occur on or after such date.
It is helpful to look back at the prior law to understand the recent changes. Under prior law, sales of real estate in New Jersey were subject to a flat 1% additional transfer tax, often referred to as the “mansion tax”, if the sales price exceeded $1,000,000. Under the prior law, although the seller (or the grantor) paid the traditional realty transfer fee, this flat 1% additional tax was paid by the buyer (or the grantee) of the property under the deed.
The new law includes two (2) major changes:
- The new law eliminates the flat 1% “mansion tax” rate and imposes a graduated percentage of tax based on the total sales price. For properties that sell between $1,000,000 and $2,000,000, the 1% flat rate still applies. For properties that sell for $2,000,000 or more, the graduated rates are as follows:
- $2,000,001 – $2,500,000: 2% of total consideration.
- $2,500,001 – $3,000,000: 2.5% of total consideration.
- $3,000,001 – $3,500,000: 3% of total consideration.
- $3,500,001 and more: 3.5% of total consideration.
Importantly, the rate listed above applies to the total sales price, not just the amount more than the above amounts.
- The new law shifts the responsibility for the payment of the full realty transfer tax, including any “mansion tax”, on the seller (or the grantor) of the property.
It is important to understand that not all real estate transfers are subject to realty transfer tax at all. Such transfers would also be exempt from any additional “mansion tax”. For example, transfers between spouses or between parents and children are exempt. Furthermore, some additional exempt transfers are ones made from an estate to a beneficiary or heir in accordance with a decedent’s Will or intestacy law and a transfer recorded within 90 days of a divorce decree.
Lastly, in addition to the above general exemptions to the realty transfer tax, there are some sales that are specifically exempt from the “mansion tax”. These exemptions include vacant land and qualified farm properties. Any applicable exemption is reported by the seller on an “Affidavit of Consideration for Graduated Percent Fee” form, which is submitted to the county clerk for recording with the deed whenever the sale price is more than $1,000,000.
If you would like to discuss how the change to the “mansion tax” law may affect your estate plan, please call our office at 856-489-8388 or visit us on our website at fendrickmorganlaw.com to schedule an appointment.
