On June 30, 2025, New Jersey’s real estate landscape was significantly altered. With the signing of Assembly Bill No. 5804 (A5804), Governor Murphy approved several important changes to New Jersey’s well-known “Mansion Tax” which will go into effect tomorrow, July 10th. These changes are expected to significantly affect the affordability of upper and middle-class homes and, consequently, change real estate purchase and sale strategies moving forward.
Intending to increase state revenue, the new legislation applies to residential real estate, commercial properties, certain farm properties, and cooperative units. The changes also apply to the transfer of controlling interest in an entity holding affected real estate. One of the few existing exceptions to the law continues to be 501(c)(3) tax exempt organizations.
Instead of a flat 1% tax on real property sales over $1 million, paid by the buyer, the new legislation shifts the tax burden to the seller and establishes a graduated fee based on property value as follows:
- 1% for sales between $1M–$2M
- 2% for $2M–$2.5M
- 2.5% for $2.5M–$3M
- 3% for $3M–$3.5M
- 3.5% for sales over $3.5M
These changes raise genuine concerns about the affordability of homes in an already tight market. Likely, sellers will raise prices to offset the cost of the new tax burden. However, for those sellers who are already under contract and do not have the option to raise the contract price, the legislation does permit a small opportunity for relief. If a contract was signed prior to July 10, 2025, and the closing occurs by November 15, 2025, sellers may apply to the director of taxation for a refund for any amount that exceeds the 1% flat tax.
If you are currently navigating a real estate deal, be sure to consult a real estate attorney to help you understand your tax exposure and review refund eligibility. Our firm is here to help protect your interests and navigate these changes.
(This blog, prepared by Campanella Law Office, is for general informational purposes only and is not intended to convey specific legal advice, nor is it intended to create or constitute an attorney-client relationship.)