Who Pays the Mansion Tax in New Jersey?

In New Jersey, a real estate transfer fee commonly known as the “mansion tax” applies to higher-valued properties. This specific real estate transfer fee can add cost to transactions. This article clarifies who pays this tax, how the amount is determined, and in which situations it may not apply, along with payment procedures.

Understanding the New Jersey Mansion Tax

The New Jersey “mansion tax” is formally known as the Graduated Percent Fee (GPF), which operates as a supplemental component of the broader Realty Transfer Fee (RTF). This additional fee is specifically imposed on real property transfers where the sale price exceeds $1 million. The tax is triggered upon the transfer of a deed, signifying a change in property ownership.

This fee applies to various property classifications within the state. It includes residential properties (Class 2), certain farm properties with a residential building (Class 3A), and commercial properties (Class 4A). Cooperative units are also subject to this additional transfer fee. The imposition of this fee is governed by state law, specifically N.J.S.A. 46:15-7.2.

Identifying the Responsible Party

The responsibility for paying the New Jersey Graduated Percent Fee, widely known as the “mansion tax,” rests entirely with the seller (grantor) of the property. This represents a significant shift from previous regulations, which typically placed the burden of a portion of this fee on the buyer. New legislation enacted in June 2025 amended state law, consolidating the payment obligation with the seller for all applicable transactions.

This updated rule applies across a range of seller types, including individuals, corporations, estates, and trusts involved in the transfer of qualifying real property. While parties may negotiate the financial terms of a sale, the legal liability for remitting this graduated fee to the state now falls to the seller at the time of deed recording. The seller is also generally responsible for the standard Realty Transfer Fee.

Determining the Taxable Amount

The New Jersey Graduated Percent Fee is calculated based on a tiered percentage of the property’s total sale price. This graduated fee is an additional charge on top of the standard Realty Transfer Fee.

For properties sold between $1 million and $2 million, the rate is 1% of the entire sale price.
Transactions exceeding $2 million but not more than $2.5 million are subject to a 2% rate.
Sales between $2.5 million and $3 million incur a 2.5% fee.
Those from $3 million up to $3.5 million face a 3% charge.
Properties sold for more than $3.5 million are subject to the highest rate of 3.5%.

For example, a property selling for $1.5 million would incur a Graduated Percent Fee of $15,000 (1% of $1,500,000). This calculation applies to the entire sale price, not just the amount exceeding the $1 million threshold.

Situations Where the Tax May Not Apply

While the Graduated Percent Fee applies to real estate transactions over $1 million, certain situations and types of transfers are exempt from this specific tax. For instance, transfers of property for a consideration of less than $100 are not subject to the fee.

Exemptions also commonly include:

Transfers between direct family members, such as spouses or parents and children.
Deeds transferred to or from governmental entities.
Transfers solely intended to provide or release security for a debt, like a mortgage.
Property transfers resulting from a divorce decree, if recorded within 90 days.
Transfers distributing a decedent’s estate to an heir.
Specific types of affordable housing transfers.

Payment Procedures

Payment of the New Jersey Graduated Percent Fee occurs at the real estate closing. During this process, the designated closing agent, such as a title company representative or an attorney, collects the necessary funds. This ensures that the fee is paid simultaneously with the finalization of the property transfer.

Following collection, the closing agent is responsible for submitting the fee to the appropriate county clerk or registrar. This submission occurs concurrently with the recording of the deed, which officially registers the change in property ownership with the county. To facilitate this, specific forms are filed along with the deed.