A Montclair homeowner listing their $3.5 million house could now owe over $47,000 in state taxes, thanks to New Jersey’s newly expanded mansion tax.
But this isn’t a problem just for the ultrawealthy. The number of homes selling for $1 million or more in New Jersey has more than doubled since 2019—surging from just under 4,800 to nearly 10,900 in 2024, according to Realtor.com data. And in the first quarter of 2025 alone, more than 2,500 such properties have already changed hands.
With more everyday sellers crossing the million-dollar mark, the tax is poised to affect a much broader swath of homeowners than its “mansion” name implies.
Here’s what home sellers in the Garden State need to know about the new rules, what it could cost them, and how to prepare.
How the new mansion tax works (and why it hits sellers harder than it used to)
For years, New Jersey’s so-called mansion tax was simple: A 1% surcharge on home sales over $1 million, typically paid by the buyer. But starting July 10, 2025, that system is getting a major overhaul.
Now, the tax burden shifts to the seller, and it’s no longer a flat fee. Under the new law, sellers will pay a tiered tax on the sale price above $1 million, ranging from 1% to 3.5% depending on the property’s value. For a $3.5 million sale, that could mean a tax bill of over $47,000—nearly double what buyers used to pay under the old rules.
This change was baked into New Jersey’s newly passed $58.78 billion fiscal year 2026 budget, and it’s projected to raise more than $550 million in annual revenue. That money will help fund a mix of public priorities, including the Affordable Housing Trust Fund, the Shore Protection Fund, the Highlands Protection Fund, and the New Jersey General Fund.
A penalty for moving?
For longtime homeowners—especially retirees or empty nesters whose property values crossed the $1 million mark during the recent run-up—New Jersey’s new tax can seem like a penalty for simply deciding to move.
While some sellers might have hoped that the newly expanded SALT deduction would help offset the cost, there’s a catch: Transfer taxes like New Jersey’s mansion tax aren’t deductible. That means there’s no relief on federal taxes. Some homeowners might face an even bigger surprise: Capital gains taxes on their home equity, thanks to federal exclusion limits that haven’t kept pace with home price inflation.
To soften the blow, early workarounds are already emerging. Sellers could consider negotiating for buyers to split the tax burden. Or they could adjust contract terms ahead of closing, or price their homes just under key thresholds (like $2.49 million or $2.99 million) to avoid triggering the next tier of fees.
Whether those strategies will hold up in the long term remains to be seen. But one thing is certain: In today’s market, even deciding to sell can come with a steep price, and sellers are already looking for ways to ease the hit.
Welcome to the era of ‘Tax the Mansion’
New Jersey isn’t alone. Across the country, state and city governments are embracing what’s become a politically popular model: Tax the most expensive home sales, and funnel the revenue into public programs.
In New York City, a “progressive mansion tax” has been on the books since 2019, adding as much as 3.9% in additional taxes on sales over $25 million. In Los Angeles, Measure ULA—nicknamed the “mansion tax”—tacks on a 4% fee to home sales over $5.15 million, with proceeds earmarked for homelessness prevention and affordable housing.
Even more states are eyeing similar moves. Washington state has already adopted a graduated excise tax structure that increases for pricier home sales, and Chicago voters rejected a similar transfer tax on homes valued at $1 million or more late last year.
It’s one of the few ways governments can raise major revenue without upsetting the broader tax base. These policies are framed as targeting the top 1% of sellers—those offloading luxury homes or investment properties—and they’ve gained traction as housing affordability remains top of mind for voters.
But as more markets see rapid home appreciation, what counts as a “mansion” is shifting. And that means some longtime owners of now-high-value homes might find themselves footing a bill they never expected.
With more markets reevaluating how they tax high-end home sales, New Jersey’s new mansion tax might be just the beginning. For sellers, understanding the math and timing their moves strategically could make a five-figure difference.
