The New "Tiered" Mansion Tax in New Jersey: What Buyers and Sellers Need to Know
Did you know New Jersey has a “mansion tax” on luxury home sales of $1 million or more? New Jersey is one of just a handful of states that impose a separate tax on higher-priced homes when they are sold. And some cities, like Los Angeles, have their own variation of a mansion tax.
In New Jersey, there’s now a significant change coming to the current mansion tax as part of the recently approved FY 2026 New Jersey Budget. Officially called the "Supplemental Fee to the Realty Transfer Fee," this new updated mansion tax will have a major impact on both buyers and sellers.
So grab your favorite summer beverage, settle into a comfy chair (maybe poolside), and let’s dive into what this new updated mansion tax in New Jersey could mean for you.
The New Mansion Tax - What's Changing
Starting July 10, 2025, New Jersey’s current “mansion tax” is getting a significant makeover. Buyers, who have traditionally paid this one-time tax on homes sold at $1 million or more, will no longer be responsible for paying it at closing. Under the new structure, the tax burden shifts to sellers instead. But that’s not all. The tax will also move from a flat 1% to a tiered system that climbs significantly higher for more expensive properties.
Here’s the new breakdown:
This comes in addition to the existing Realty Transfer Fee (RTF) paid by the seller, so the total expense for a New Jersey seller can really add up. And since this new “tiered” tax structure can have such a significant impact on a seller’s net proceeds, it’s reasonable to expect that some sellers will look for ways to offset this larger tax burden. As discussed below, this might include, for example, a higher list price, fewer concessions, or tougher overall negotiations from the seller.
What This Means for Sellers in New Jersey
While this shift might seem like a win for buyers, the reality is that it could have significant consequences that ripple through the whole New Jersey luxury market. Here's why.
Net Proceeds Shrink - Sellers will need to plan for these higher closing costs when calculating their net profit. Consider this example: on a home sale price of $3.6 million, the new tax could mean an additional seller expense of $126,000 at closing. In contrast, under the previous 1% flat fee mansion tax (before July 10th), this amount would have been significantly less at $36,000, and it would have been paid by the buyer, not the seller!
Pricing Strategies Matter Even More - For New Jersey homes around the $1 million mark, it’s not uncommon for the final purchase price to be negotiated just below that threshold. Have you ever wondered why you sometimes see a home sell for $999,999? It’s because buyers and sellers often negotiate the price to avoid triggering the mansion tax altogether. Now, with the new tiered structure, sellers may use similar pricing tactics at each threshold for luxury homes. For example, a seller might choose to list at $1.9 million instead of $2.1 million to attract offers in a lower tax bracket, thereby keeping more of the sale proceeds at closing.
Negotiations May Get Tougher - Since sellers are now carrying this extra cost, many may look for ways to offset it. For example, some sellers might be less willing to negotiate generous credits for repairs that come up during a home inspection.
Re-Thinking Agent Compensation - Sellers facing larger tax bills may also look closely at their total selling expenses, including realtor compensation. Some may try to negotiate lower listing agent fees or decide not to offer buyer agent compensation at all. It’s another reminder of why having the right agent, one who understands the full financial picture and can advocate for your interests every step of the way, is of crucial importance in today's complex market.
Inventory May Get Scarcer - It’s also possible that some homeowners may decide not to list at all if the new tax significantly eats into the proceeds they’d planned to use for their next move. This could reduce the number of available homes in the $1 million-plus market and with less housing inventory, buyer competition may spur higher sales prices, particularly near the mansion tax thresholds. Of course, how much this affects pricing will depend on local buyer demand and how the broader luxury market evolves.
A Reality Check for Buyers
While New Jersey buyers may be celebrating that they no longer have to pay the mansion tax at closing, the reality is that this shift could have some unintended consequences. That $1 million-plus home you fall in love with might end up costing more in other ways. With sellers looking to offset the added cost, you may see higher list prices, fewer concessions, and stiffer competition at certain price points.
That’s why it’s so critical to look beyond just the asking price. Run the numbers carefully with your realtor, as well as your lender. This will help to understand your true cost of ownership and ensure you leave some room for negotiation strategy. You will want to consider how inspection credits, appraisal contingencies, or creative closing terms can help you stay competitive without overextending your budget.
Time will tell exactly how this plays out. Smart buyers, however, will go in with eyes wide open, ready to pivot as the real estate market shifts more in their favor in some areas.
Timing Matters - A New Twist on Attorney Review
Whether you’re reading this just before or right after the July 10th deadline, it’s important to recognize that timing can play a major role in negotiations. Some buyers and sellers may use contract timing as a strategic tool to get "under contract" before the new tiered mansion tax takes effect, or to push it past the deadline so the seller picks up the higher tax bill.
Attorney review can become more complex in situations like this. Sellers eager to avoid the higher tax may try to speed up the attorney review period, while buyers might see value in slowing it down. And in multiple-offer situations, some sellers might even revisit accepted offers to negotiate who covers the tax.
This is just one example of how details like timing and contract terms can impact your bottom line. A trusted realtor and attorney can help you navigate these nuances of the attorney review process in New Jersey and help protect your interests at every step.
The Real Estate Market - It's Always Changing
This is more than just a tax change. The new tiered mansion tax structure could reshape how luxury home sales are priced and negotiated across New Jersey. Sellers will need to sharpen their pricing strategy, understand their potential net proceeds, and carefully consider how realtor compensation factors in. Buyers will need to be cognizant of market trends, especially when it comes to shifting prices and tougher negotiations. As always, it’s wise for both buyers and sellers to consult with their financial advisor to ensure the decisions they make align with their bigger financial picture.
Beyond the new tax, the overall real estate market in many areas is beginning to soften as inventory grows, and some neighborhoods are already leaning toward a buyer’s market. This means buyers may have more choices, and thus, more room to negotiate. On the other hand, sellers may need to adjust expectations to stay competitive.
One thing is certain. In this ever-changing and complex real estate market, the expertise of a rockstar realtor is invaluable. If you’re thinking about buying or selling a home in New Jersey, now is the time to have a plan and a trusted partner by your side. So enjoy that summer beverage and soak up the sun. Remember, when you are ready to talk strategy, I’m here to help you navigate this new landscape with clarity and confidence.
Thinking about your next move? Reach out to me at [email protected] or simply visit my website BestinShowing.com. We can discuss your real estate goals and map out the best strategy for you!
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The New "Tiered" Mansion Tax in New Jersey: What Buyers and Sellers Need to Know
July 2025
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