New Jersey Mansion Tax

In recent years, the mansion tax in New Jersey has gained prominence due to rising property prices.

This has raised concerns among those planning to buy or sell real estate in the state. If you’re considering buying a house in New Jersey and are concerned about what types of taxes you may be subject to, don’t despair. Our NJ real estate attorney at Curbelo Law is an expert in all real estate matters in the state.

What You Need to Know About the New Jersey Mansion Tax in 2026

New Jersey imposes an additional fee of 1% of a property’s sales price on properties sold for more than $1 million. This additional fee is known as the “mansion tax.” 

Previously, this rate was fixed, but starting July 10, 2025, it will be applied in stages based on the property’s value. 

Below are the current rates based on the sales price:

• Properties sold between $1 million and $2 million are still subject to a 1% fee.
• Those selling between $2 million and $2.5 million pay 2%.
• Between $2.5 million and $3 million, the rate is 2.5%.
• From $3 million to $3.5 million, it rises to 3%.
• For properties valued over $3.5 million, the maximum rate of 3.5% applies.

Which properties do the new mansion tax rates apply to?

New Jersey’s new tiered mansion tax rates apply to the following properties:

• Residential real estate valued at over $1 million,
• Most commercial properties,
• Certain agricultural properties, and
• Cooperative units.

To evaluate possible exemptions, you can consult directly on the State Division of Taxation website or contact our attorney.

Property classifications affected by the mansion tax in New Jersey

Under New Jersey law, properties are grouped into different classes. However, not all properties are subject to the mansion tax.

In general, the mansion tax in New Jersey applies to what the law considers qualified property. That is, those belonging to the following categories:

• Class 2: Residential property. Includes single-family or multi-family dwellings for up to four occupants and condominiums.
• Class 3A: Agricultural property with buildings. This refers to agricultural land that has a structure designed or suitable for residential use.
• Class 4A: Commercial property. Includes premises used for commercial purposes, such as offices, shops, or shopping centers. Industrial properties (Class 4B) and Class 4C apartments are not included.
• Class 4C: Cooperative units. This category is intended for the use and enjoyment of five or more families, including residential cooperatives and mutual housing societies.

Who pays the mansion tax in New Jersey?

Previously, the mansion tax was paid by the buyer at closing, unless the contract stated otherwise and both parties agreed to split the cost.

However, with the reform, the payment obligation now falls directly on the property seller. This applies to all qualified properties.

How is the mansion tax calculated in New Jersey?

The mansion tax in New Jersey is calculated at a progressive rate based on the property’s sales price. For example, 1% for sales between $1 and $2 million and up to 3.5% for sales over $3.5 million. 

The tax is applied to the total value of the transaction and must be paid by the seller at the time of recording the deed.

Which homes are not subject to the mansion tax in New Jersey?

Certain properties will be exempt from paying the mansion tax in New Jersey. These are:

• Schools.
• Churches.
• Properties owned by charities.
• Apartments with 5 or more units.
• Agricultural properties without existing residence.
• Industrial properties. 
• Vacant land.
• Agricultural properties that qualify for a farmland assessment.
• Cemeteries.

Is a vacant lot exempt from the mansion tax in New Jersey?

Vacant land can cost more than $1 million (depending on the area). However, it may be exempt from paying this tax. 

It should be noted that the mansion tax changes if the purchase is for the corporate entity of someone who owns Class 4A commercial property.

Other mansion tax exemptions 

Some transfers are exempt from the estate tax, such as:

• Inheritances.
• Divorces.
• Bankruptcies.
• Transfers between family members.
• Proofreading.

Government-owned or community-owned properties are also exempt from real estate transfer fees. Senior citizens and buyers with disabilities are also partially exempt from this tax.

How to avoid paying the mansion tax in New Jersey?

To avoid paying the mansion tax, you must do one of the following:

• Buy a property for $999,999 or less, or
• Be creative with prices slightly above $1 million. For example, by negotiating with the seller or reaching an agreement with them.

Nowadays, the tax is paid when the property deed is recorded in New Jersey with the county clerk, but it is the seller who must cover this cost.

If you’re looking for more information about quitclaim deeds in New Jersey, our blog will show you everything you need to understand these topics.

What’s happening with commercial real estate in New Jersey?

The commercial real estate market is going through a difficult time, and recent tax changes could exacerbate the crisis. Below are some factors that explain this situation:

• The sector was already weakened by the increase in remote work following the pandemic.
• In the first quarter of the year, leased area in the north and center of the state fell by 26%.
• Many business owners fear that the new mansion tax will increase pressure on commercial property sellers.
• The central concern is that these measures discourage investment and hinder the recovery of the state’s commercial sector.

Buyers should be prepared at all times

Today, $1 million properties are no longer a rarity in New Jersey. With the median home value exceeding $560,000, approaching the million-dollar threshold is becoming increasingly common, even for mid-sized single-family homes.

Therefore, it’s crucial to know whether the purchase price could trigger additional taxes and how that could impact the final budget. 

Although the sale price is the main factor, factors such as the property classification and the type of deed used also play a role.

Updated examples of the New Jersey mansion tax

Below are some practical examples based on the new rates currently in effect:

• Sale of a residential property for $3 million (Class 2): The seller must pay a 2.5% tax, equivalent to $75,000.
• Sale of a Class 4A commercial property for $5 million: The applicable tax will be 3.5%, or $175,000. If it can be proven that the property is a Class 4C property, an appeal is possible.
• Sale of a property with commercial premises on the ground floor and residential units on the upper floors: The application of the tax will depend on the classification assigned by the tax assessor.

New Jersey Mansion Tax Experts

The mansion tax can represent a significant cost in high-value real estate transactions. With recent legal changes, it’s critical to understand how it is applied and what options exist to minimize its impact.

• At Curbelo Law, we have extensive experience in complex transactions in New Jersey.
• We advise both buyers and sellers of properties subject to tax.
• We evaluate potential exemptions, contractual strategies, and tax planning.

Attorney Carolina Curbelo and her team can help you make safe, legally compliant decisions. Call us today.