New Jersey Real Estate Attorney Christine Matus Clarifies Buyer Responsibilities Under the State's Mansion Tax

As home prices continue to climb across New Jersey, many buyers are discovering that the state's so-called "mansion tax" applies to properties they never expected to fall into that category. Christine Matus (https://matuslaw.com/who-pays-the-mansion-tax-in-nj/), a New Jersey real estate attorney at The Matus Law Group, is working with clients to understand what the mansion tax is, how it applies, and what they can do to prepare for it. Introduced in 2004, the mansion tax imposes a 1% fee on any property transaction over $1 million, a threshold that once signified luxury but is increasingly common today. For new buyers purchasing homes that were previously considered modest, this additional expense can come as a surprise. According to Matus, a knowledgeable New Jersey real estate attorney can help buyers identify whether their property will be subject to the tax and provide strategies for navigating its impact.

Christine Matus explains that the mansion tax is generally the responsibility of the buyer and must be paid at closing. The tax is calculated as 1% of the total sales price-not just the portion over $1 million. This means that a property bought for $1.2 million would carry a mansion tax of $12,000, paid in full by the purchaser. As a New Jersey real estate attorney, Matus emphasizes that legal guidance is critical at the early stages of a real estate transaction. "We understand that the prospect of an additional tax can be intimidating, especially for first-time homebuyers. Our team is committed to providing personalized guidance and effective solutions to meet your needs," said Matus. The law does allow for buyers and sellers to negotiate who pays the tax, but in most cases, the buyer absorbs the cost. In a competitive market, buyers have less leverage to shift this responsibility, making it even more essential to budget accurately from the beginning.

While the mansion tax is primarily associated with high-end residential homes, it applies to a broader range of properties than many realize. Covered categories include one- to three-family residences, condominiums, cooperative housing units, and even certain commercial properties classified under New Jersey's real estate codes. However, there are exemptions. The mansion tax does not apply to vacant land, industrial properties, farm land without residential buildings, or apartment buildings with five or more units. Properties owned by charitable organizations, religious institutions, or schools may also be exempt. Certain transfers-such as those resulting from divorce, inheritance, or family arrangements-can also avoid the tax. New Jersey real estate attorney Christine Matus urges buyers to consult a real estate attorney to determine if their specific situation qualifies for an exemption.

Although the mansion tax cannot be deducted on federal or state income tax returns, it may still affect the long-term tax implications of owning a home. Christine Matus explains that the amount paid for the mansion tax can be added to a buyer's cost basis in the property. This becomes important when the home is eventually sold. A higher cost basis can reduce the seller's taxable capital gains, potentially minimizing the amount owed in taxes at the time of sale. Matus points out that this is often overlooked and can be a key element in planning for future financial outcomes related to the property. Buyers should understand that while the mansion tax does not offer an immediate tax break, it can help reduce the tax burden years later.

In today's real estate market, $1 million homes are no longer limited to the luxury segment. Rising property values have brought more homes into this price range, catching many buyers off guard when they realize they are subject to the mansion tax. According to Zillow, the median home price in New Jersey reached $431,899 and rose by over 16 percent in 2021 alone. With such sharp increases, more and more homes are now priced above $1 million. Christine Matus advises buyers to determine early on whether their property falls into this category. She also recommends exploring whether it is possible to negotiate the tax burden with the seller, although in many cases the market does not favor such negotiations.

While New Jersey law does not require the involvement of a real estate attorney in property transactions, Christine Matus stresses the value of legal guidance. Real estate transactions involve complex contracts, inspections, disclosures, and title transfers-all of which carry legal risks. A New Jersey real estate attorney helps buyers and sellers identify potential issues early in the process, ensuring legal compliance and avoiding costly mistakes. Matus notes that while real estate agents play a key role in showing homes and managing offers, they are not equipped to provide legal advice or represent a buyer's interests in legal matters related to the purchase. She believes that bringing a lawyer into the process early offers an added layer of protection and confidence.

The mansion tax adds a layer of complexity to New Jersey real estate transactions, particularly as more properties cross the million-dollar threshold. Buyers should be aware of the tax implications before entering into a purchase agreement and should seek legal guidance to determine how the tax applies to their situation. Christine Matus and The Matus Law Group continue to work with clients throughout New Jersey to clarify tax obligations and ensure smoother, more informed home purchases. As Matus explains, understanding the mansion tax and planning for it is not just about paying an additional fee-it's about protecting an individual's financial interests now and in the future.

About The Matus Law Group:

The Matus Law Group is a New Jersey-based legal practice serving clients in real estate transactions and related matters. Led by Christine Matus, the firm provides legal support to buyers and sellers navigating New Jersey's complex property laws, including the state's mansion tax. With a focus on clarity and client service, The Matus Law Group works to ensure that every transaction proceeds smoothly and in compliance with state regulations.

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