Like other states, New Jersey continues to seek ways to increase revenue. One way to do this is to attach levies to high-value transactions, such as home and vehicle sales, that occur within the state. There might be something to the notion that it is easier to apply a tax to a larger deal than to ask residents for the money directly. Since 2004, New Jersey has had what many people referred to as a “Mansion Tax,” which affected home sales with a purchase price higher than $1 million. Now, a revised version of the law makes significant adjustments to the manner in which the tax is applied.
Once a category reserved for the most luxurious estates, homes selling for over $1 million are increasingly becoming the norm in many parts of New Jersey. According to Realtor.com® data, seven-figure residential property transactions more than doubled between 2019 and 2024. The momentum shows no signs of slowing down, with over 2,500 such transactions recorded in the first quarter of 2025 alone. In many communities, houses that are comfortable, but hardly opulent, now trigger the additional obligation.
Under the old law, the buyer paid a flat 1 percent tax on sales valued at more than $1 million. However, starting on July 10, the responsibility for paying the tax shifted from the buyer to the seller, reflecting a broader trend in taxation policy. Moreover, the following graduated scale has been instituted so that the tax can go as high as 3.5 percent:
-
Purchase amount above $1 million up to $2 million: 1 percent
-
Purchase amount above $2 million up to $2.5 million: 2 percent
-
Purchase amount above $2.5 million up to $3 million: 2.5 percent
-
Purchase amount above $3 million up to $3.5 million: 3 percent
-
Purchase amount above $3.5 million: 3.5 percent
The real-world effects can be dramatic for expensive properties. Even in transactions between $1 million and $2 million, where the tax remains one percent, switching the payment responsibility is a key difference.
Owners looking to sell million-dollar properties need to prepare for additional financial planning and budgeting to accommodate the revised tax structure. Working closely with a knowledgeable real estate attorney can help you make sound decisions based on the current rule.
Frieri Law Group represents clients in residential and commercial real estate transactions. Our office is in Cranford and we serve clients in Union, Morris and Somerset counties as well as other parts of New Jersey. To make an appointment regarding your specific legal needs, please call 908-883-3390 or contact us online.