The New Jersey state legislature has passed new legislation, as part of the State’s 2026 fiscal year budget, that directly and significantly impacts sellers and buyers of real property in New Jersey. Previously, a 1% fee (known as the “Mansion Tax”) was imposed on buyers of residential property, “Class 4A” commercial property, certain farm property, and cooperative units, for consideration in excess of $1 million as recited in the deed. Similarly, buyers of a controlling interest in an entity that directly or indirectly owns “Class 4A” commercial property were subject to a 1% fee (the “Controlling Interest Transfer Tax”) where the consideration or other valuation of the property was in excess of $1 million.
Signed into law by Governor Philip Murphy on June 30, 2025, the new legislation (N.J. S5000, 4666) increases the amount of the Mansion Tax and Controlling Interest Transfer Tax on transfers over $2 million in consideration and shifts responsibility for payment of these taxes from the buyer to the seller.
The new schedule for the Mansion Tax and Controlling Interest Transfer Tax consists of “graduated percentage rates”, as follows:
- Transfers over $1 million but not more than $2 million – 1%
- Transfers over $2 million but not more than $2.5 million – 2%
- Transfers over $2.5 million but not more than $3 million – 2.5%
- Transfers over $3 million but not more than $3.5 million – 3%
- Transfers over $3.5 million – 3.5%
The new tax structure will be effective on all transfers made on or after July 10, 2025. The State will consider a transfer of real property to occur on the date that the deed is submitted for recording with the county recording officer. Therefore, if the deed is submitted for recording on or after July 10th, the additional fee required to record the deed must be paid by the seller in accordance with the new schedule. Transfers occurring prior to July 10th are subject to the original Mansion Tax statute.
The good news for sellers currently under contract is that the new law provides a mechanism by which sellers may apply to the Director of the Division of Taxation for a refund for all amounts paid in excess of 1% of the consideration if the deed (a) has a consideration of $2 million or more, (b) was recorded on or before November 15, 2025, and (c) transferred property pursuant to a contract that was fully executed before July 10, 2025. If you are eligible for a refund, an RTF-3 Form must be submitted, along with copies of the deed, contract, and settlement statement from the transaction.
A link to the full text of the new legislation is included below:
https://pub.njleg.gov/Bills/2024/S5000/4666_I1.HTM
