How the New Changes to the NJ Mansion Tax May Affect Your Real Estate Deal

By Zach Gotlib, Esq. | Gotlib Law Office

As a real estate attorney in New Jersey, I’m often asked about the infamous "mansion tax." With recent changes to this tax making headlines in Trenton, both buyers and sellers need to understand how these updates may affect real estate transactions—especially in the luxury and commercial markets.

Here’s a breakdown of what’s changing, and what it means for you.

What Is the NJ Mansion Tax?

The New Jersey mansion tax is a 1% transfer tax assessed on real estate purchases over $1 million. This tax is typically paid by the buyer at closing and applies to both residential and commercial property sales.

For example, if you’re purchasing a home or commercial building for $1.2 million, you’re generally paying $12,000 in mansion tax at closing.

What’s Changing in 2025?

Governor Murphy’s 2025 budget includes a proposed expansion of the mansion tax, specifically targeting high-end commercial properties, including multifamily housing and mixed-use developments.

Here are the key takeaways:

• Higher Tax Rate for Commercial Deals: For non-residential and multifamily properties sold above certain thresholds (rumored to be between $2 million and $5 million), the mansion tax rate may increase from 1% to as much as 2.5%.

• Focus on Investors & Developers: The goal is to raise revenue from large-scale investment properties, not primary residences. But in practice, this may also affect sellers and developers trying to unload high-value assets.

• Still 1% for Most Residential Buyers: For now, single-family homebuyers purchasing a $1.5M house in Montclair or Hoboken aren’t expected to see a change—the 1% rate still applies.

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How This Could Affect Your Deal

1. Increased Closing Costs for Buyers

If you’re buying a commercial or multifamily property over the new threshold, your closing costs could increase significantly. For a $4 million transaction, a 2.5% mansion tax means a $100,000 tax—compared to $40,000 under the current 1% rate.

2. Negotiation Leverage Shifts

Sellers may now be asked to contribute to the tax or lower their price. In tight-margin deals, this can make or break a transaction.

3. Impact on 1031 Exchanges

For investors using a 1031 exchange, the higher upfront tax outlay could affect liquidity and delay reinvestment.

4. Potential Rush to Close Before the Law Takes Effect

If you're in contract now or thinking about listing a property soon, timing could be crucial. If the new rules take effect in late 2025, closing earlier could mean substantial tax savings.

Who Should Pay Attention

• Commercial real estate investors

• Multifamily property owners

• Developers and syndicators

• Buyers of high-value mixed-use buildings

• Luxury property buyers just above $1M

What You Should Do Now

✅ Review Your Current Contracts: If you're already in contract and expected to close in late 2025, speak with your real estate attorney about timing and tax implications.

✅ Factor the New Tax into Negotiations: Whether you’re on the buy-side or sell-side, this tax may shift leverage and should be discussed up front.

✅ Consult Early: These changes add complexity to deals that already involve tight timelines, lender approvals, and multiple parties. The earlier legal counsel is involved, the more options you’ll have to mitigate risk.

Final Thoughts

The proposed changes to New Jersey’s mansion tax are a reminder that real estate transactions—especially at the high end—are increasingly shaped by tax policy. Whether you're an investor, developer, or high-net-worth buyer, it's more important than ever to work with a legal team that understands how to structure deals efficiently.

At Gotlib Law Office, we work closely with clients to navigate the nuances of New Jersey real estate law—from due diligence to closing. If you're considering a property purchase over $1 million, or if you're unsure how these changes might affect your transaction, let’s talk.

📞 Contact us today at GotlibLawOffice.com or schedule a consultation to protect your investment and close with confidence.