CSG Law Alert: What Sellers & Buyers of $1M+ Properties Need To Know About Changes To The “Mansion Tax” Law
A recently enacted law changes how the “Mansion Tax” is applied in certain real estate transactions exceeding $1 million.
Prior to these revisions to the law, buyers of certain real estate for consideration in excess of $1 million were statutorily responsible for paying a fee in the amount of 1% of the consideration in said real estate transaction (the “Mansion Tax”). The new law – passed by the New Jersey Senate as Bill S4666 on June 26, 2025 and subsequently signed into law by Gov. Phil Murphy – shifts the statutory responsibility for the Mansion Tax to the seller in a transaction.
This new legislation also increases the Mansion Tax rate for more expensive properties with a tiered fee structure based on the property’s sale price. A schedule of the updated Mansion Tax rates based on the consideration for the property is listed below:
- In excess of $1 million but not in excess of $2 million: 1% of the entire consideration
- In excess of $2 million but not in excess of $2.5 million: 2% of the entire consideration
- In excess of $2.5 million but not in excess of $3 million: 2.5% of the entire consideration
- In excess of $3 million but not in excess of $3.5 million: 3% of the entire consideration
- In excess of $3.5 million: 3.5% of the entire consideration
The classifications of properties subject to Mansion Tax remain unchanged and are as follows: Class 2 (Residential); Class 3A (Farm property and any other real property transferred to the same buyer in conjunction with Class 3A property); Class 4A (Commercial properties), and cooperative units. The new law continues to impose the Mansion Tax on the sale or transfer of a controlling interest of an entity that owns property subject to Mansion Tax but shifts the statutory burden of payment to the seller as well.
To account for transactions already in progress prior to the law’s implementation, there is a temporary refund mechanism for sellers. Sellers can apply to receive a refund of any portion of the Mansion Tax in excess of 1% of the consideration paid at closing if the (i) contract was fully executed before July 10, 2025 and (ii) the deed transferring the property is recorded on or before November 15, 2025. The refund request must be submitted to the New Jersey Division of Taxation within one year of the deed’s recording date, along with any documentation required by the Division’s Director as proof of claim.
Please reach out to Gemma Giantomasi or Ross Childs of the CSG Law Real Estate Group if you have any questions regarding the new Mansion Tax law.