New Jersey’s Mansion Tax: What October 2025 Sellers Must Know Before Listing Their Home
If you're planning to sell a home worth over $1 million in New Jersey this October, you're facing a completely different financial landscape than sellers did just a few months ago. The mansion tax law that took effect on July 10, 2025, didn't just tweak the existing system: it fundamentally restructured who pays and how much they pay.
The biggest shock? You, as the seller, now pay the entire mansion tax. And depending on your sale price, you could be looking at rates as high as 3.5% of your total sale price. That's not a typo, and it's not just on the amount over $1 million: it's on the entire purchase price.
The New Tax Structure That's Catching Sellers Off Guard
Gone are the days of the simple 1% flat rate paid by buyers. New Jersey now uses a progressive tiered system that escalates quickly as sale prices increase. Here's what you'll pay as a seller:
| Sale Price Range | Tax Rate (Paid by Seller) | Example Tax on $2M Sale | Example Tax on $3M Sale |
|---|---|---|---|
| $1M - $2M | 1.0% | $20,000 | - |
| $2M - $2.5M | 2.0% | - | $60,000 |
| $2.5M - $3M | 2.5% | - | $75,000 |
| $3M - $3.5M | 3.0% | - | $90,000 |
| Over $3.5M | 3.5% | - | - |
Let's break down what this means with real numbers. If you're selling a $2.1 million home, you'll pay $42,000 in mansion tax. Previously, your buyer would have paid $21,000. That's a $21,000 hit to your net proceeds that many sellers aren't prepared for.
For higher-priced properties, the impact is even more dramatic. A $3.6 million sale now generates a $126,000 mansion tax bill: all coming out of your pocket at closing.
Who Gets Hit and When
The mansion tax applies to residential properties, including single-family homes, condos, co-ops, and even certain commercial properties. It also covers farm properties and transfers of controlling interest in entities that own qualifying real estate.
The key timing factor: This applies to any closing after July 10, 2025. Since we're in mid-October, any property you list now will definitely fall under the new rules. There's no grandfathering for new listings: the law applies based on your closing date, not when you signed a contract or listed your home.
The Pricing Strategy Dilemma
This tax creates a genuine pricing challenge. Many sellers are discovering that their expected net proceeds are significantly lower than anticipated. Consider these scenarios:
Scenario 1: You hoped to net $1.8 million from selling your $2 million home. After the 1% mansion tax ($20,000), plus typical closing costs and realtor fees, your actual net proceeds might be closer to $1.65 million.
Scenario 2: Your $3.2 million luxury home now carries a $96,000 mansion tax burden. Combined with other closing costs, you're looking at over $100,000 in additional expenses that didn't exist for sellers six months ago.
Some sellers are adjusting their listing prices upward to maintain their desired net proceeds, while others are reconsidering whether to sell at all. The market is still adjusting to these new realities, and pricing strategies vary significantly across different price points and regions.
What Properties Are Actually Affected
Don't assume this only impacts multi-million dollar estates. The $1 million threshold includes:
- Residential properties: Single-family homes, townhomes, condos
- Co-operative apartments: Including NYC-area co-ops owned by NJ residents
- Mixed-use properties: Where residential use predominates
- Farm properties: Agricultural land and buildings
- Commercial Class 4A properties: Certain commercial real estate
- Entity transfers: Sales involving controlling interest in companies that own qualifying property
Limited exemptions exist for government agencies, certain nonprofit organizations, and specific family transfers, but most typical residential sales will be subject to the tax.
Beyond the Mansion Tax: Your Total Transfer Cost Picture
The mansion tax doesn't exist in isolation. As a New Jersey seller, you're also responsible for:
- Real Estate Transfer Fee: Based on the property value
- Municipal transfer taxes: Varies by location
- Attorney fees: Typically $1,500-$3,000 for residential transactions
- Title insurance: Usually split with buyer
- Recording fees and other closing costs
When combined, these costs can represent a substantial percentage of your sale proceeds. For a $2.5 million home, total transfer-related costs could easily exceed $60,000.
Strategic Considerations for October 2025 Sellers
1. Recalculate Your Break-Even Point Whatever price you thought you needed to achieve your goals, add the mansion tax to your required net proceeds. This isn't optional: it's a hard cost that will be deducted at closing.
2. Consider Market Timing Some sellers are wondering whether to wait and see if the law changes. However, there's no indication of imminent modifications, and real estate markets have their own timing considerations that often outweigh tax implications.
3. Evaluate Pricing Strategies You have three basic approaches:
- Price higher to maintain your net proceeds
- Accept lower net proceeds at your original price point
- Take your property off the market temporarily
4. Factor in Negotiation Impact Buyers may be more aggressive in negotiations, knowing that you're facing additional tax burdens. Be prepared for this dynamic in your pricing and negotiation strategy.
What You Need to Do Right Now
Document Everything: Keep detailed records of all improvements, renovations, and capital investments in your property. While these don't directly offset the mansion tax, they're crucial for capital gains calculations.
Get Professional Guidance: Work with a real estate attorney familiar with the new mansion tax provisions. The law includes nuances around entity transfers, timing, and exemptions that require professional evaluation.
Run the Numbers: Calculate your true net proceeds before listing. Include the mansion tax, all closing costs, real estate commissions, and any capital gains implications. Many sellers are surprised by the total impact.
Consider Payment Planning: The mansion tax is due at closing, so ensure your settlement calculations account for this significant cash requirement.
The Bottom Line for Sellers
The mansion tax shift represents one of the most significant changes to New Jersey real estate transactions in recent years. As an October 2025 seller, you're operating under fully implemented new rules with no transition period or grandfathering.
The financial impact varies dramatically based on your sale price, but for properties over $2 million, you're looking at tens of thousands of dollars in additional costs that buyers used to absorb. This isn't just a line item on a closing statement: it's a substantial expense that affects your pricing strategy, net proceeds, and potentially your decision to sell at all.
Smart sellers are getting ahead of these changes by working with experienced legal professionals who understand both the mansion tax implications and the broader market dynamics at play. Don't let October pass without fully understanding how these changes affect your specific situation.
Ready to navigate the new mansion tax landscape? Contact our experienced real estate attorneys who've been helping New Jersey sellers adapt to these changes since they took effect in July.
Call or text 732-292-5662 or email me at ruma@keyesquire.com