New Jersey Increases Mansion Tax Rates, Shifts Payment to Sellers

New Jersey's updated mansion tax, effective July 10, shifts the payment responsibility from buyers to sellers and introduces progressive rates for properties selling above $2 million, ranging from 2% to 3.5%. Homes priced between $1 million and $2 million remain taxed at 1%, while sales over $3.5 million could result in sellers paying over $47,000 in tax. The tax is expected to generate approximately $280 million in its first year to support the state's $58.8 billion budget, funding affordable housing, coastal protection, and other initiatives. Housing advocates support the increase but urge that at least half of the revenue be allocated directly to the Affordable Housing Trust Fund to address New Jersey’s severe housing shortage. The legislation also provides a refund mechanism for sellers who closed deals before the law took effect, mitigating some transitional financial impacts. Real estate groups warn that the tax could reduce market listings or encourage pricing strategies to avoid higher fees, potentially impacting the housing market dynamics.