NJ Mansion Tax: 2025 Changes, Rates, and Exemptions

The NJ mansion tax, officially renamed the Graduated Percent Fee in 2025, is a state charge on real estate transfers where the price exceeds $1,000,000. As of July 10, 2025, the seller pays it, not the buyer, and the rate climbs on a graduated scale from 1% to 3.5% depending on the total sale price. If you’re closing a high-value New Jersey deal in 2026, the old flat 1% buyer-paid rule no longer applies, and mixing up the two versions can cost tens of thousands of dollars.

What Changed in 2025

For years, the mansion tax was a flat 1% fee paid by the buyer on any qualifying property transfer over $1,000,000. P.L. 2025, c. 69, signed on June 30, 2025, rewrote N.J.S.A. 46:15-7.2 in three fundamental ways. The flat 1% rate became a graduated scale topping out at 3.5%. Liability shifted from the grantee to the grantor. And the fee now explicitly covers cooperative units alongside residential, farm, and commercial properties.¹

The Division of Taxation confirmed that all deeds submitted to a county recording officer on or after July 10, 2025 are subject to the new graduated rates and seller-liability rules. Deeds received by the recording office on or before July 9, 2025 remain under the old 1% buyer-pays structure, regardless of when the actual recording occurs.²

Who Pays the Fee

Under current law, the seller (grantor) is legally responsible for paying the Graduated Percent Fee, a complete reversal of the pre-July 2025 rule.² The seller also remains responsible for the standard Realty Transfer Fee, so both charges now fall on the same side of the closing table.

Nothing stops a buyer and seller from negotiating who actually bears the economic cost. In competitive markets, a seller might demand the buyer cover the fee through a higher purchase price or a contract provision. But as far as the state is concerned, the grantor’s name is on the hook, and the county recording officer won’t accept the deed without proper payment from that side of the transaction.³

Rate Tiers and How the Fee Is Calculated

The fee is calculated on the entire consideration stated in the deed, not just the amount above $1,000,000. The rate depends on the total price:³

Over $1,000,000 up to $2,000,000: 1% of the total consideration
Over $2,000,000 up to $2,500,000: 2% of the total consideration
Over $2,500,000 up to $3,000,000: 2.5% of the total consideration
Over $3,000,000 up to $3,500,000: 3% of the total consideration
Over $3,500,000: 3.5% of the total consideration

A property that sells for exactly $1,000,000 does not trigger the fee. The statute uses “in excess of” $1,000,000, so the threshold kicks in at $1,000,001.¹

Because the percentage applies to the full price, the jumps between tiers are steep. A home selling for $2,000,000 owes $20,000 (1%). Bump that price to $2,000,001 and the fee doubles to $40,000 (2% of the full amount). One extra dollar of consideration adds $20,000 in fees. Sellers approaching a tier boundary should think carefully about pricing.

Which Properties Trigger the Fee

The Graduated Percent Fee applies only to properties in four tax classifications:⁴

Class 2 residential: single-family homes, condominiums, townhouses, and other dwellings classified as residential.
Class 3A farm property, but only when the farm includes a building intended for residential use. Raw farmland without a residence is excluded.
Class 4A commercial: commercial properties other than industrial or apartment buildings.
Class 4C cooperative units. Transfers of cooperative apartment shares are explicitly covered under the current statute.

Industrial properties and apartment buildings are notably absent. A $5,000,000 apartment complex classified as Class 4B would not trigger the Graduated Percent Fee, while a $1,500,000 commercial office building classified as Class 4A would.³

What Counts as Consideration

The state defines consideration broadly. It includes the entire compensation paid or to be paid for the transfer of title, which goes well beyond the cash handed over at closing.⁵ Mortgages assumed by the buyer, remaining loan balances, liens taken subject to, and stock or capital contributions exchanged as part of the deal all factor into the total. If a buyer pays $800,000 cash and assumes a $400,000 mortgage, the consideration is $1,200,000 and the fee applies.

This matters for transactions near the $1,000,000 threshold. Parties who think they’ve priced a deal just below the trigger sometimes forget that an assumed mortgage pushes the consideration over the line.

Exemptions

The statute carves out three specific exemptions from the Graduated Percent Fee itself, separate from the broader Realty Transfer Fee exemptions:³

Transfers to tax-exempt organizations recognized by the IRS under Section 501(c)(3).
Property transfers incidental to a corporate merger or acquisition, provided the property’s equalized assessed value is less than 20% of the total assets exchanged. The seller must claim this at recording and file additional documentation.
Intercompany transfers between combined group members of a unitary business, for transfers occurring on or after January 1, 2021.

The broader exemptions in N.J.S.A. 46:15-10 also shield certain transfers. The ones most relevant to typical sellers include:⁶

Transfers between spouses or between parent and child.
Deeds recorded within 90 days of a divorce decree dissolving the marriage between grantor and grantee.
Transfers by an executor or administrator distributing a decedent’s estate to heirs or devisees.
Deeds by or to the United States, New Jersey, or any subdivision of either government.
Transfers by a trustee in bankruptcy or an assignee for the benefit of creditors.
Deeds solely to provide or release security for a debt.
Correction or confirmation deeds for a previously recorded deed.

An exemption must be noted on Form RTF-1EE at the time of recording, and if you’re claiming an exemption after the fact, the deed typically needs to be re-recorded at the county clerk’s office to reflect it.⁴

Filing and Payment

The seller or the seller’s attorney completes Form RTF-1EE, officially titled “Affidavit of Consideration for Graduated Percent Fee.” The form records the consideration paid, identifies the property by block and lot number, municipality, and county code, and designates the property’s tax classification. Every signature must be notarized.⁷

The completed RTF-1EE is submitted to the county clerk or register of deeds along with the deed itself. The recording officer will not accept the deed until the fee has been paid and verified. Most county offices require payment by certified check, bank check, or attorney trust account check. Personal checks and cash are generally not accepted.

Penalties for Late or Incorrect Payment

The Division of Taxation applies the same penalty and interest framework it uses for other state taxes. Interest accrues on any unpaid balance at the prime rate plus 3%, compounded annually. A late payment penalty of 5% of the tax due may be assessed. If a required return is filed late, an additional 5% per month penalty applies, capped at 25% of the balance due.⁸

If the debt goes to a collection agency, an 11% referral cost recovery fee is added. The Division can waive penalties if you demonstrate reasonable cause, but interest is not waivable. On a $3,000,000 sale where the fee is $75,000, even one month of delay adds meaningful cost.

The Standard Realty Transfer Fee Still Applies

The Graduated Percent Fee is layered on top of New Jersey’s standard Realty Transfer Fee, which the seller also pays. The standard fee uses a tiered rate-per-$500 structure that varies with the total consideration. For transactions over $1,000,000, the top tier of the standard fee is $6.05 per $500 of consideration.⁴

On a $2,000,000 sale, the standard RTF alone comes to roughly $24,200 across all the tiers, and the Graduated Percent Fee adds another $20,000 at the 1% rate. Together, that’s approximately $44,200 in state transfer fees before any county-level recording charges. Sellers of high-value properties should budget for both when estimating net proceeds.

A Note on the 2025 Transition Period

Sellers who signed contracts before July 10, 2025 but recorded on or before November 15, 2025 can request a refund of any amount paid above the old 1% rate. That claim is filed on Form RTF-3 within one year of the deed’s recording date, with the executed contract, settlement statement, and deed attached.⁹¹⁰ By 2026, the November 15 recording window has closed, so this grace period is relevant only for sellers who recorded in time and still need to submit their refund paperwork.

Federal Tax Treatment

Transfer taxes like the Graduated Percent Fee are not deductible as an itemized deduction on your federal income tax return. The IRS explicitly lists transfer taxes on property sales as nondeductible.¹¹

For sellers, the fee reduces the net amount realized on the sale, which affects capital gains calculations. For buyers who contractually agree to cover the fee, the IRS treats costs connected with a purchase, including transfer fees, as part of the property’s cost basis.¹² A higher basis means lower taxable gain when the property is eventually sold. Either way, the fee has tax consequences worth discussing with an accountant before closing.

1
New Jersey Legislature. New Jersey Code C.46:15-7.2 – Additional Fee on Certain Transfers of Real Property
2
New Jersey Department of the Treasury. Division of Taxation – Clarification on Graduated Percent Fee Implementation
3
Justia. New Jersey Code 46:15-7.2 – Additional Fee on Certain Transfers of Real Property
4
Division of Taxation. Property Sale Realty Transfer Fee
5
NJ Division of Taxation. Realty Transfer Fee FAQs
6
Justia. New Jersey Code 46:15-10 – Exemptions from Realty Transfer Fee
7
State of New Jersey Department of the Treasury. State of New Jersey RTF-1EE – Affidavit of Consideration for Graduated Percent Fee
8
NJ Division of Taxation. Penalties, Interest, and Collection Fees
9
New Jersey Legislature. P.L. 2025, Chapter 69
10
State of New Jersey Department of the Treasury. Claim for Refund – Realty Transfer Fee
11
Internal Revenue Service. Topic No. 503, Deductible Taxes
12
Internal Revenue Service. Basis of Assets