The latest budget passed by the New Jersey legislature and signed by term-limited Governor Phil Murphy quietly enacted changes to New Jersey’s Mansion Tax, which affects not only residential properties but commercial properties classified as Class 4A “commercial properties” for real estate tax purposes and will likely have a significant impact on real estate transactions in New Jersey.
Instead of the buyer/grantee being responsible for payment of the Mansion Tax, the revisions make the seller/grantor responsible for payment, at the new rates as calculated below
- Consideration in excess of $1,000,000 but not in excess of $2,000,000 = 1%
- Consideration in excess of $2,000,000 but not in excess of $2,500,000 = 2%
- Consideration in excess of $2,500,000 but not in excess of $3,000,000 = 2.5%
- Consideration in excess of $3,000,000 but not in excess of $3,500,000 = 3%
- Consideration in excess of $3,500,000 = 3.5%
The changes are effective July 10, 2025; however, for transfers of Class 4A properties for which a contract of sale was executed prior to July 10, 2025, and the deed evidencing the transfer of the subject property is recorded on or before November 15, 2025, the seller/grantor may file for a refund of the portion of the Mansion Tax in excess of 1% that was paid at the time of the recording of the deed. The appeal must be filed with the NJ Division of Taxation within one year from the recording of the deed. This means that as of July 10, 2025, the seller/grantor will need to pay the Mansion Tax at the rate specified above in full and seek a refund thereafter for the portion of the fee paid that should not have been paid.
In a real estate market that is already navigating choppy waters, this seems likely to have a chilling effect on both commercial and residential real estate transactions in New Jersey for the foreseeable future.
