The real estate landscape in New Jersey has undergone a dramatic change. If you're buying or selling a home over $1 million, you need to understand one thing clearly: the Mansion Tax NJ is no longer business as usual.

 

Effective July 10, 2025, the state of New Jersey introduced a major overhaul of its Mansion Tax. This changes who pays and how much they pay on affected homes. Whether you're an active homebuyer, seller, or investor, these changes could directly impact your strategy.

 

So let’s break it all down, no fluff, just facts.

 

What Is the Mansion Tax in New Jersey

Historically, the Mansion Tax in New Jersey has been a 1% transfer tax applied to all residential properties sold for $1 million or more. This tax was traditionally paid by the buyer at closing. This created an additional cost that influenced purchasing decisions and negotiation strategies, especially in high-demand areas such as Short Hills, Summit, Montclair, and towns along the Midtown Direct train line to New York City.

 

However, starting July 10, 2025, things have changed.

 

Who Pays the Mansion Tax in NJ Now

It is now the seller's responsibility to pay the Mansion Tax, not the buyer.

 

This fundamental shift marks a significant departure from the traditional model. Under the new law, sellers are fully responsible for paying the Mansion Tax at closing, not the buyer. This change is shaking up listing strategies and pricing conversations in the New Jersey luxury real estate market.

 

The New Tiered Mansion Tax NJ Structure (2025 Update)

In addition to changing who pays the tax, the state has introduced a progressive, tiered tax system that increases with the value of the property. Here’s how it now breaks down:

 

• $1 million to $2 million: Tax remains 1%
• $2 million to $2.5 million: Tax increases to 2%
• $2.5 million to $3 million: Tax increases to 2.5%
• $3 million to $3.5 million: Tax increases to 3%
• Over $3.5 million: Tax increases to 3.5%

It is Important to note that these percentages apply to the entire sale price, not just the amount above the threshold. So a $3.6M home sale would result in a $126,000 Mansion Tax (3.5% of the full $3.6M).

 

Why This Change Matters for Sellers

While buyers are no longer writing the mansion tax check at closing, sellers are now absorbing this cost, and that has immediate financial implications. Here’s what sellers need to consider:

 

• Net proceeds will shrink: A seller listing a $2.5 million home could be paying $62,500 in Mansion Tax, straight out of their equity.
• Listing price adjustments: Many sellers are expected to raise their asking prices to offset the added costs, potentially affecting demand and time on the market.
• Negotiation leverage shifts: Sellers will be less willing to reduce listing prices, as they know they have an extra layer of tax expense to cover.

If you're a homeowner planning to list soon in Millburn, Chatham, Westfield, or other neighborhoods in New Jersey, it's time to start planning. Reassess your pricing strategy now with an experienced real estate advisor.

 

How Will Buyers Be Affected

At first glance, it may look like buyers are getting a break, but not so fast. Here's why buyers should still care:

• Increased listing prices: With sellers compensating for tax losses, buyers could see inflated listing prices, especially on homes near tier thresholds.
• Fewer price reductions: Sellers might be less flexible during negotiations if they’re absorbing additional costs upfront.
• More competition at key price brackets: Properties just under the $2M, $2.5M, or $3M mark may become more attractive, creating demand bottlenecks.

 

The bottom line is, you’re still feeling the ripple effect, even if you’re not paying the tax directly.

 

Market Impact: What We’re Seeing Already

The impact is particularly significant in towns along the midtown direct train line, where many properties fall within or above these new tax brackets. Homes in Short Hills, Livingston, and South Orange are seeing tighter price tolerances and longer decision cycles.

 

Furthermore, homebuyers in New Jersey are pausing to re-evaluate affordability. Sellers are doing more upfront work with agents to price homes strategically, especially those hovering just above major tax thresholds.

 

Who Is Most Impacted

• Sellers of homes priced $2M and above. These homeowners are seeing a steep increase in transaction costs.
• Buyers targeting homes just above $2M+. Expect more competition, more negotiation pressure, and less room for closing cost credits.
• Luxury investors and developers. Profit margins are getting slimmer, especially when factoring in renovation costs, marketing, staging, and now a higher tax burden.

 

What Should Sellers Do to Minimize Impact

• List smarter, not higher: Work with your agent to find a price that reflects market demand and keeps you below key tax thresholds where possible.
• Time the market: With limited inventory, pricing under $2M or $2.5M could bring multiple offers from buyers eager to avoid higher tax brackets.
• Offer buyer incentives: Consider offering to pay for inspections or include upgrades to sweeten the deal without inflating your sale price.
 

Strategic Advice for Buyers

• Get pre-approved with margin: A property at $1.99M could become $2.1M overnight if pricing shifts to account for seller tax.
• Target just under each bracket: Buyers should now focus their searches on homes priced just under $2M, $2.5M, or $3M to avoid the ripple effects of inflated pricing.
• Be ready to act: The competition in the sub-tier brackets is dramatically increasing. Therefore, have your financing, timeline, and offer strategy ready.
 

Why This Change Is Happening

New Jersey lawmakers argue this shift helps fund critical infrastructure, schools, and transit, particularly in urban and suburban corridors where high-value homes are concentrated. But in practice, it redistributes closing costs and introduces more friction into high-end real estate transactions.

 

Critics argue that the change could disincentivize sellers, slow down the movement of luxury homes, and distort market value.

 

What Should You Do Now

Whether you're buying or selling, these changes are not just bureaucratic fine print. They're deal-altering realities. In a market already defined by low inventory and high buyer demand, even a 1% change can significantly impact the landscape.

 

At The Saritte Harel Team, we’re helping clients strategize early to make smart decisions amid these shifting policies. If you're unsure how the Mansion Tax NJ affects your next move, we can walk you through every scenario. We’ll guide you from pricing to net proceeds to timing your sale for maximum value.

 

Connect with The Saritte Harel Team

Want a personalized plan based on your property value, location, and timing? Let’s talk. Contact us today at www.saritteharel.com or email us directly to schedule a free consultation.

 

Don’t let the mansion tax catch you off guard. Know your numbers. Know your strategy, and partner with experts who know the New Jersey market inside and out.