NJ Mansion Tax in 2025 – What Buyers Need to Know Before Closing

Buying a high-value home in New Jersey is not just about negotiating the sale price or arranging financing. One critical cost often overlooked is the NJ Mansion Tax — a one-time state tax that applies to certain real estate transactions. Understanding how this tax works, when it applies, and how to file it correctly helps buyers avoid penalties or delays during closing.

For anyone purchasing residential property over $1 million, knowing the mansion tax rules is essential. This guide explains everything you need to know about the New Jersey Mansion Tax in 2025 and how professional tax experts can help ensure compliance.

What Is the Mansion Tax in New Jersey?

The Mansion Tax in New Jersey is a one-time state tax applied to the transfer of residential properties valued at $1 million or more. The law was introduced in 2004 as part of the Realty Transfer Fee (RTF) Act to generate revenue from luxury real estate sales and ensure high-value transactions contribute fairly to state funding.

Origin and Purpose of the Mansion Tax

Initially, the mansion tax was implemented to increase state revenue during times of fiscal shortfall. While commonly referred to as a “luxury home” tax, it applies to any qualifying residential property—whether it’s a single-family home, condominium, or cooperative unit—sold for $1 million or more.

When the Mansion Tax Applies

The mansion tax applies when the consideration (sale price) of a residential property equals or exceeds $1 million. It is typically due when the deed is recorded with the county clerk.

Buyers who are unsure whether their transaction qualifies can consult New Jersey State Tax Services for a professional review of their situation. This helps confirm liability and ensures proper calculation before closing.

Property Types Covered

• One- to four-family residential dwellings
  
  
• Cooperative units and condominiums
  
  
• Certain vacant land intended for residential use
  
  

Properties classified as commercial, industrial, or mixed-use are generally exempt, but it’s still recommended to have these classifications verified through property tax assessment and appeal services.

Mansion Tax Rate and Calculation in 2025

As of 2025, the NJ Mansion Tax rate remains 1% of the total purchase price for qualifying residential transactions.

How the 1% Tax Is Calculated

For example:
If a property is sold for $1.3 million, the mansion tax due is $13,000. This payment is made in addition to recording fees and any applicable local transfer taxes.

Property Price

Mansion Tax (1%)

$1,000,000

$10,000

$1,250,000

$12,500

$1,750,000

$17,500

Handling multiple tax obligations can complicate the closing process. Working with experts in State Tax Planning and Consulting ensures accurate calculation and timely filing.

Who Pays the Mansion Tax in NJ?

Under New Jersey law, the buyer is responsible for paying the mansion tax. The seller (grantor) does not owe this tax but must cooperate in filing accurate documents.

Buyer’s Responsibility at Closing

The mansion tax is due at the time of deed recording, and payment is typically handled by the buyer’s attorney or title company. Ensuring all payments are properly processed helps avoid any delay in recording the deed.

Role of the Seller and the Grantor

While sellers are not directly responsible for the mansion tax payment, they are required to complete parts of the RTF-1EE form and ensure that all information matches official property transfer records. Errors can lead to administrative delays, so both parties benefit from Tax Preparation and Filing Assistance by a CPA-led team.

Exemptions and Exceptions in 2025

Certain transactions are exempt from the NJ Mansion Tax, depending on the nature of the property or the relationship between the parties.

Residential vs. Commercial Properties

The mansion tax applies only to residential properties. Commercial real estate, including office buildings or industrial spaces, is generally not subject to this tax. Investors should still confirm obligations through Property Tax Assessment and Appeal Services, especially for mixed-use developments.

Family Transfers and Legal Exemptions

Transfers between spouses, parents and children, or within a trust are typically exempt. Similarly, transfers resulting from inheritance, divorce settlements, or gifts may qualify for exemption. Buyers should verify exemption status with a tax professional to avoid unnecessary payments.

Common Misconceptions About the Mansion Tax

Many buyers assume the mansion tax applies only to large estates or luxury mansions. In fact, any residential property valued at or above $1 million triggers this tax, regardless of its size, design, or location.

Another misconception is that the mansion tax replaces the transfer fee. It does not — the Realty Transfer Fee is a separate charge, and both may apply in certain cases.

Filing and Payment Process for NJ Mansion Tax

The filing and payment of the mansion tax occur as part of the property transfer process.

The RTF-1EE Form Explained

The RTF-1EE (Realty Transfer Fee Form) documents the total consideration, applicable exemptions, and amount of mansion tax due. It must be completed and submitted to the county recording office along with the deed.

When and How to File the Tax

The form and payment are submitted at closing. In most transactions, the buyer’s attorney or title company handles submission. For accuracy and compliance, buyers often engage professionals offering State Tax Planning and Consulting services.

Consequences of Non-Payment

Failure to pay the mansion tax can result in:

• Delay in recording the deed
  
  
• Additional penalties or interest
  
  
• Review by the New Jersey Division of Taxation
  
  

To avoid these issues, buyers are advised to work with firms that provide Tax Preparation and Filing Assistance for real estate transactions.

Difference Between NJ Mansion Tax and Millionaire’s Tax

New Jersey also enforces a Millionaire’s Tax, which is completely separate from the mansion tax.

Purpose and Application

• Mansion Tax – One-time tax on property purchases over $1 million.
  
  
• Millionaire’s Tax – Annual state income tax applied to individuals with income above a certain threshold (currently $1 million).
  
  

Key Taxpayer Differences

A person buying a $1.5 million home may owe the mansion tax even if their income is below the millionaire tax bracket. Conversely, someone earning over $1 million but purchasing a modest home might owe the Millionaire’s Tax, not the mansion tax.

Understanding both helps taxpayers plan better, especially when they consult professionals for Tax Credits and Incentives in New Jersey.

How the Mansion Tax Affects Real Estate Buyers in 2025

The 1% mansion tax directly affects overall home affordability and closing costs. Buyers in high-value markets such as Bergen, Hudson, Essex, and Monmouth Counties should factor this tax into their total purchase budget.

Impact on Home Affordability

For every $1 million spent on a property, buyers must allocate an extra 1% for the mansion tax. This can affect mortgage qualification, total closing costs, and post-closing liquidity.

Tax Planning Before Property Purchase

Pre-closing consultation with State Tax Planning and Consulting professionals ensures that all tax implications are reviewed before finalizing the deal. This proactive step helps prevent unexpected financial burdens.

Professional CPA Guidance for Buyers

A CPA-led review of your real estate transaction ensures the correct tax rate, eligibility for exemptions, and compliance with state filing requirements. Professional guidance reduces errors and streamlines the entire property registration process.

Get Expert Help with Mansion Tax Filings in New Jersey

The NJ Mansion Tax can be confusing for both first-time and experienced buyers. Misunderstanding filing procedures or exemptions may result in overpayment or compliance delays.

GTA Accounting Group provides New Jersey State Tax Services, covering compliance, documentation, and payment assistance for real estate transactions. Our CPA team helps ensure accuracy across all property-related filings, including property tax assessment, realty transfer documentation, and amendment filings where applicable.

If you’re purchasing a residential property worth $1 million or more, contact GTA Accounting Group for professional help with tax preparation and filing assistance for smooth, compliant property transfer.

FAQs About the NJ Mansion Tax (2025)

1. What triggers the NJ Mansion Tax?
Any residential property purchase of $1 million or more triggers the mansion tax at the time of deed recording.

2. Who pays the mansion tax in New Jersey?
The buyer is responsible for paying the mansion tax, not the seller.

3. Is the mansion tax refundable if the deal falls through?
If the deed is not recorded, the payment can be adjusted, but refunds require official proof and proper documentation.

4. Are commercial properties subject to the mansion tax?
No, commercial and industrial properties are generally exempt, but mixed-use properties should be reviewed by a CPA to confirm classification.

5. Can a CPA help reduce my mansion tax liability?
While the rate is fixed, a CPA can help identify exemptions and ensure all forms are correctly filed to avoid penalties.

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