Who Pays the Mansion Tax in New Jersey?

New Jersey imposes a tax on high-value real estate transactions, often called the “mansion tax.” This tax is a supplemental component of the state’s broader Realty Transfer Fee and functions as a 1% levy on the total sale price of specific properties. The revenue generated from this tax contributes to the state’s general fund.

Determining Applicability of the Tax

The primary factor for the mansion tax is the property’s sale price. Any real estate transaction where the total consideration is $1 million or more is subject to this fee. The tax is triggered by the total value, not just the amount exceeding the threshold. The legal responsibility for paying this tax rests with the buyer, a distinction from other transfer fees that are often paid by the seller.

The tax applies to specific classes of property, including:

• Class 2 residential properties (one- to four-family homes and condominiums)
• Class 3A farm properties that include a residential structure
• Class 4A commercial properties
• Class 4C cooperative units

Certain real estate transfers may be exempt from the mansion tax. Transfers between qualifying family members, such as parents and children or spouses, may not be subject to the tax if no monetary consideration is involved. Transfers of property to certain nonprofit organizations that are exempt from taxation may also qualify for an exemption.

Calculating the Mansion Tax

The mansion tax calculation is based on the property’s final sale price. The tax is a flat 1% of the total consideration, which is the full purchase price agreed upon by the buyer and seller. The 1% rate applies uniformly to all qualifying transactions of $1 million or more.

For example, if a residential property is sold for $1,500,000, the mansion tax owed by the buyer would be $15,000. This is calculated by multiplying the total consideration ($1,500,000) by the 1% tax rate. A sale at exactly $1,000,000 would result in a $10,000 tax liability.

This 1% fee is an additional tax levied on top of the general Realty Transfer Fee (RTF). The seller is responsible for paying the base RTF, while the buyer is solely responsible for paying the additional 1% mansion tax.

Required Forms and Payment Process

Payment of the mansion tax is part of the real estate closing process. The buyer is responsible for completing the Affidavit of Consideration for Use by Buyer (Form RTF-1EE). This form requires the buyer to state the total consideration for the property, which is the basis for the tax calculation.

The tax is collected from the buyer when the property title is transferred. A closing agent, such as a title insurance company representative or an attorney, handles the collection and remittance of these funds. The agent calculates the tax based on the final sale price on Form RTF-1EE and collects this amount from the buyer’s funds.

Following collection, the closing agent submits the payment, the completed Form RTF-1EE, and the new deed to the appropriate county clerk’s office for recording. This procedure ensures the tax is paid before the legal transfer of ownership is finalized.