What Is the New Jersey Transaction Tax?

When selling real property in New Jersey, a closing cost for the seller is the Realty Transfer Fee (RTF). This state-imposed fee is a prerequisite for recording the deed and officially transferring ownership to the buyer. The RTF is calculated based on the property’s sale price, helps fund state and county programs, and applies to nearly every conveyance of title unless a specific exemption is met.

Commonly referred to as a “transaction tax” or “exit tax,” the RTF is a one-time charge levied at the point of sale and is distinct from annual property taxes.

Determining Who Pays the Tax

The seller of the property is responsible for paying the Realty Transfer Fee at closing. While a buyer and seller can negotiate to shift this cost, the legal liability for any underpayment remains with the seller. An exception occurs for properties sold for more than $1,000,000, where the buyer must pay an additional 1% fee, often called the “Mansion Tax.” This is paid in addition to the primary RTF paid by the seller.

The state provides several full and partial exemptions from the RTF. Full exemptions are based on the nature of the transfer and include:

• Transfers for a consideration of less than $100.
• Specific familial transfers, such as between a husband and wife or from a parent to a child.
• Deeds executed as part of a divorce decree.
• Transfers to or from government agencies.
• Deeds that correct a previously recorded document.

Partial exemptions are available for qualifying senior citizens aged 62 or older, blind persons, or disabled persons. To qualify, the seller must be a New Jersey resident who owns and occupies the home at the time of sale. This reduced rate also applies to the sale of qualified low- and moderate-income housing. When claiming an exemption, a specific form must be filed with the deed.

Calculating the Realty Transfer Fee

The Realty Transfer Fee is based on a tiered system determined by the property’s sale price, with rates applied per $500 of consideration. These calculations apply to standard sales as well as new construction. For standard transactions on properties sold for $350,000 or less, the rates are:

• $2.00 per $500 for the first $150,000.
• $3.35 per $500 for consideration between $150,001 and $200,000.
• $3.90 per $500 for consideration between $200,001 and $350,000.

For properties sold for more than $350,000, a higher set of rates applies:

• $2.90 per $500 of consideration up to $150,000.
• $4.25 per $500 on amounts from $150,001 to $200,000.
• $4.80 per $500 on amounts from $200,001 to $550,000.
• $5.30 per $500 for consideration between $550,001 and $850,000.
• $5.80 per $500 for amounts between $850,001 and $1,000,000.
• $6.05 per $500 for any portion exceeding $1,000,000.

The buyer’s Supplemental Fee, or “Mansion Tax,” is a 1% fee on the total sale price for properties sold for over $1,000,000. For example, on a $1.2 million sale, the buyer would be responsible for a $12,000 supplemental fee.

Sellers who qualify for a partial exemption use a lower rate schedule. For sales of $350,000 or less, the rates are $0.50 per $500 up to $150,000 and $1.25 per $500 for the portion between $150,001 and $350,000. If the consideration for a partially exempt sale exceeds $350,000, a different reduced-rate schedule applies:

• $1.40 per $500 of consideration up to $150,000.
• $2.15 per $500 for amounts between $150,001 and $550,000.
• $2.65 per $500 for amounts between $550,001 and $850,000.
• $3.15 per $500 for consideration between $850,001 and $1,000,000.
• $3.40 per $500 for amounts over $1,000,000.

Required Documentation for the Transfer

The primary document for the Realty Transfer Fee is the Affidavit of Consideration for Use by Seller (Form RTF-1). This affidavit must be completed and submitted with the deed to the county recording officer. The form requires the seller to attest to the accuracy of the information provided under penalty of law and provides the legal justification when claiming an exemption.

The seller must provide several pieces of information on the form, including:

• Full names and addresses of the seller (grantor) and buyer (grantee).
• The property’s location, including its block and lot number.
• The county and municipality.
• The total consideration for the sale.
• The calculated amount of the Realty Transfer Fee being paid.

Official versions of the RTF-1 form can be obtained from the New Jersey Division of Taxation’s website or any county clerk’s office. For transactions over $1 million, the buyer must also file a separate form, the Affidavit of Consideration for Use by Buyer (Form RTF-1EE).

The Payment and Filing Process

The completed and notarized forms, including RTF-1 and RTF-1EE if applicable, must be presented at the property closing. This process is typically managed by a closing agent, such as a title insurance agent or an attorney. Payment of the Realty Transfer Fee is made at the time of filing to the County Recording Officer in the county where the property is located.

For fees under $10,000, payment can be made from an attorney’s trust account. However, for any fee of $10,000 or more, the payment must be in the form of certified funds, such as a bank-certified check or money order. Once the forms are submitted and the fee is paid, the County Recording Officer records the deed, which officially enters the transfer of ownership into the public record.