New Jersey Real Estate Attorney Christine Matus Explains Who Pays the Mansion Tax Under the 2025 Law

RED BANK, NJ - New Jersey's mansion tax underwent significant changes in 2025, shifting responsibility for the supplemental realty transfer fee from buyers to sellers on properties exceeding $1 million and introducing a graduated rate structure for higher-value transactions. New Jersey real estate attorney Christine Matus of The Matus Law Group (https://matuslaw.com/who-pays-the-mansion-tax-in-nj/) is providing guidance on how the revised mansion tax law affects residential and commercial property transactions throughout the state, including which properties qualify, which are exempt, and what sellers and buyers should consider before closing.

According to New Jersey real estate attorney Christine Matus, the mansion tax is a supplemental fee added to the standard Realty Transfer Fee on property sales over $1 million. The state legislature first enacted the tax in 2004 under N.J.S.A. 46:15-7.2 as a flat 1% fee placed on buyers. On June 30, 2025, Governor Phil Murphy signed Bill S4666/A5804, which shifted legal responsibility for the fee from buyers to sellers for deeds submitted for recording on or after July 10, 2025. The tax is separate from the standard Realty Transfer Fee that sellers have paid since 1968 under N.J.S.A. 46:15-5, and both fees are collected by the county recording officer when the deed is submitted. "Many property owners are unaware that the mansion tax applies to the full purchase price, not just the amount above $1 million," explains Matus. "A home sold for $1.2 million triggers a fee on the entire amount, resulting in a $12,000 charge that catches many parties off guard at closing."

New Jersey real estate attorney Christine Matus notes that the 2025 law replaced the original flat 1% rate with a tiered system for higher-value transactions. Properties sold between $1 million and $2 million remain subject to a 1% rate, while sales between $2 million and $2.5 million face a 2% rate. The rate continues to increase at each threshold, reaching 2.5% for sales between $2.5 million and $3 million, 3% for sales between $3 million and $3.5 million, and 3.5% for properties exceeding $3.5 million. Each tier applies to the total consideration stated in the deed, meaning a property sold for $2.1 million incurs a 2% tax on the full amount, totaling $42,000.

Attorney Matus adds that the financial impact at each price threshold can be substantial for New Jersey sellers. "Selling a property for $1,999,000 instead of $2,001,000 means the difference between a $19,990 tax and a $40,020 tax," she notes. "Pricing strategy has become a critical consideration in New Jersey's high-value real estate market, and sellers need to understand these brackets before listing."

The Matus Law Group advises that the mansion tax applies to specific property classifications as defined by the New Jersey Administrative Code at N.J.A.C. 18:12-2.2. Qualifying property types include residential property such as one- to four-family homes and condominiums, farm property that includes a residential dwelling, cooperative units, and Class 4A commercial property including office buildings and retail spaces. The classification is determined by the municipal tax assessor, and properties that do not fall into a qualifying class are not subject to the fee.

Several property types and transaction types are exempt from the mansion tax under N.J.S.A. 46:15-10. Vacant land with no structures, qualified farmland without a residential dwelling, industrial properties, and apartment buildings with five or more units are not subject to the fee. Transfers between spouses or between parents and children, transfers made by an executor or administrator in accordance with a will or New Jersey intestacy law, correction deeds, and transfers recorded within 90 days of a divorce decree are also excluded. When a deed is exempt, the parties should use the current Affidavit of Consideration for Graduated Percent Fee, Form RTF-1EE, and state the exemption in the deed package.

The law includes a limited transition provision for contracts fully executed before July 10, 2025. If the deed was recorded on or before November 15, 2025, sellers may apply to the New Jersey Division of Taxation for a refund of any amount paid in excess of the original 1% rate. The refund claim must be filed within one year of the deed recording date. In Monmouth County, deeds are recorded at the County Clerk's Office at 33 Mechanic Street in Freehold.

The shift in responsibility has also changed how contract negotiations unfold in New Jersey. While the law places legal liability on the seller, the parties remain free to allocate the fee differently through their purchase agreement. Some sellers may increase asking prices to offset the new obligation, while buyers should review contract language carefully to understand whether any portion of the tax is being shifted back. The mansion tax is paid in addition to the standard Realty Transfer Fee, and together these fees represent a significant closing cost for high-value real estate transactions across the state.

"Working with a real estate attorney is especially important for transactions near a price threshold where the rate changes significantly," advises Matus. "An attorney can review contracts, verify exemptions, and ensure all transfer tax forms, including Form RTF-1 and Form RTF-1EE, are filed correctly with the county recording officer."

For those buying or selling property valued above $1 million in New Jersey, consulting a real estate attorney may help protect financial interests and avoid unexpected costs at closing.

About The Matus Law Group:

The Matus Law Group is a New Jersey-based law firm dedicated to real estate law and estate planning. Led by attorney Christine Matus, the firm serves families and property owners throughout Monmouth County, Ocean County, and the state of New Jersey. For consultations, call (732) 785-4453.

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