On June 30, 2025, Governor Phil Murphy signed Assembly Bill A5804 (S4666), significantly revising New Jersey’s “mansion tax” with major implications for high-valued real estate transactions. Adopted in 2004, the “mansion tax” imposed a tax equal to 1% of the purchase price of all residential property, and of many types of commercial property, valued at $1 million or more. This newly enacted amendment shifts the tax payment obligation from buyers to sellers and introduces new progressive rates for properties sold over $2 million.
Key Changes Effective July 10th, 2025:
The most significant change is the shift of the “mansion tax” payment responsibility from the buyer to the seller. This tax applies to residential property, many commercial and farm properties, and cooperative units. The traditional Realty Transfer Fee remains in place and continues to be seller-paid.
Additionally, properties valued over $2 million will now be subject to higher, graduated rates:
| Taxable Consideration | New Rate (Seller-Paid) |
| $1 M – $2 M | 1 % |
| $2 M – $2.5 M | 2 % |
| $2.5 M – $3 M | 2.5 % |
| $3 M – $3.5 M | 3 % |
| Over $3.5 M | 3.5 % |
Important Dates to Note:
- Effective Date: Contracts executed on or after July 10th, 2025 must follow the new schedule.
- Limited Refund Window: Sellers who execute a contract before July 10th, 2025, and records the deed by November 15th, 2025, may apply to the Division of Taxation for a refund of any amount paid above the original 1% rate.
What This Means for Sellers:
- Higher Closing Costs: Every dollar above $1 million will now trigger tax liability for the seller, an expense previously borne by the buyer.
- Pricing Strategy Pressure: While listing a property at $999,999 might seem attractive, proper valuation and negotiation remain crucial in today’s market.
- Timing Considerations: For deals already in the pipeline, it is essential to immediately review whether an early execution or closing could preserve the lower cost structure, or if a refund application will be necessary.
- Potential for Reduced Inventory: Some owners may consider holding back listings or renegotiating prices to offset their new tax burden, potentially making prime assets scarcer.
What This Means for Buyers:
- Reduced Sticker Shock: Buyers will no longer be responsible for funding the mansion tax, which could potentially increase demand for $1 million-plus properties.
- More Competitive Market: The real estate market may become more competitive as fewer buyers will be deterred from purchasing properties listed over $1 million.
- Tighter Inventory: The number of properties listed above $1 million may decline as sellers attempt to avoid paying the “mansion tax”.
How Lindabury Can Help:
Lindabury’s Real Estate & Land Use Group provides comprehensive legal counsel to developers, investors, and high-net-worth individuals involved in real estate transactions. Our team can provide guidance on navigating the complexities introduced by the revised “mansion tax”:
- Financial Impact Analysis: We can assist in modeling the true net proceeds or acquisition costs under the new tax rates.
- Contract Review: Our team can review existing purchase agreements to identify and address tax-allocation clauses.
- Transaction Structuring: We can advise on structuring transactions and ownership entities to manage potential tax exposure effectively.
- Refund Application Support: Where applicable, we can help facilitate the process of applying for refunds for any amount paid in excess of the original 1% rate.
To discuss how the revised mansion tax may affect your pending or prospective deal, please contact a member of Lindabury’s Real Estate team.