Shopping in Tewksbury or Newark and eyeing a seven-figure listing? Closing costs add up fast, and New Jersey’s “mansion tax” is one many buyers and sellers ask about right away. You want a simple answer on when it applies, who pays it, and how to plan for it so there are no surprises at the closing table. In this guide, you’ll learn the essentials, plus local tips for Hunterdon and Essex County transactions. Let’s dive in.
NJ mansion tax at a glance
New Jersey’s mansion tax is a state charge that applies when the total consideration for a real estate transfer meets a set threshold. The key rule is straightforward: 1% of the consideration when the purchase price is $1,000,000 or more.
The mansion tax is separate from the state’s Realty Transfer Fee. It is also separate from federal income taxes and local recording fees. The tax is usually paid at closing and the settlement agent remits it to the State of New Jersey.
In most deals, the buyer pays it. That said, allocation of closing costs is negotiable in the contract. For current guidance and forms, check the New Jersey Division of Taxation, which is the state’s primary source for transfer tax rules and procedures. You can find updates on the New Jersey Division of Taxation site.
When it applies
The $1,000,000 threshold
If the consideration is $1,000,000 or more, the mansion tax applies. If it is $999,999 or less, it does not. This threshold is bright-line and it is assessed on the total consideration for the transfer.
What counts as consideration
Consideration is usually the sale price, but it can include cash paid and assumed liabilities, like a mortgage the buyer takes on as part of the purchase. Non-cash items can also factor into the total, depending on the structure of the deal.
Buyers and sellers sometimes try to allocate part of the price to personal property or other non-realty items. The state reviews allocations and can challenge any that appear designed mostly to avoid the mansion tax. Aggressive allocations can bring scrutiny.
Multi-parcel and multi-unit purchases
If you buy several contiguous parcels or an entire building and the combined price is $1,000,000 or more, the mansion tax can apply to the transaction as a whole. Splitting one deal into separate closings to stay under the threshold is a tactic that may be challenged if the transfers look like one combined purchase in substance and timing.
Property types that trigger it
Single-family homes, condos, co-ops, and multi-family buildings can all trigger the tax when the price meets or exceeds the threshold. Commercial transactions can be more complex and depend on the details of the statute and the deal. When in doubt, confirm with the Division of Taxation or your closing attorney.
Who pays and when
In local practice, the buyer typically pays the mansion tax at closing. This is not a hard rule. Your contract should clearly state who pays to avoid any confusion late in the process.
The tax is collected by the closing attorney, title company, or settlement agent. It is remitted with the required documentation to the state at the time the deed is recorded. If the tax is not paid when due, penalties and interest can apply under state rules.
Mortgage and funds-to-close planning
Lenders look at the full picture of funds needed to close. Since the mansion tax often falls on the buyer, plan for it in your cash-to-close. Mortgage proceeds generally cannot be used to pay taxes unless your lender allows it and discloses it. Always confirm with your lender early in the process.
Exemptions and special cases
Some transfers that are exempt from the state’s Realty Transfer Fee are also not subject to the mansion tax. Examples often include gifts, certain probate-related transfers, and some transfers to or from government entities or qualified nonprofits. These are fact specific and depend on the statutory definitions.
For statutory language and legislative history, you can review materials available through the New Jersey Legislature website. For how the Division of Taxation applies rules to common transactions, consult its published guidance or speak with your closing attorney, tax advisor, or title company.
Tewksbury and Newark: local tips
Hunterdon County and Tewksbury transactions
In and around Tewksbury, most mansion tax triggers are higher-value single-family homes or larger-lot properties. If you are making an offer near or above $1,000,000, build the 1% tax into your budget from the first draft of your numbers. Deeds and transfer documents are recorded at the Hunterdon County Clerk’s office, which handles recording and county-level fees. The county does not decide mansion tax liability, but it does process the documents your settlement agent submits.
Coordination is key. Ask your attorney and title company to confirm the calculation, prepare the transfer return, and plan for the payment so there are no last-minute delays.
Newark and Essex County transactions
In Newark and other parts of Essex County, higher-density housing means you may see the mansion tax triggered by expensive condos, large single units, or multi-family and mixed-use buildings. The same 1% rule applies when the total consideration is at or above $1,000,000. Recording occurs at the Essex County Clerk’s office. As in Hunterdon, the county records the documents, while the state sets and collects the mansion tax.
If you are buying multiple condo units or an entire building, consider the total price across all parcels or interests. The state can look at the overall substance of related transfers.
Contract and timing checklist
- Confirm whether the price will meet or exceed $1,000,000.
- Agree in writing who pays the mansion tax. Do not assume standard practice.
- Share the tax estimate with your lender so your loan estimate and closing disclosure reflect accurate cash-to-close.
- Coordinate early with your title company and attorney so the transfer return is ready.
- Avoid allocation strategies that could look like tax avoidance.
Planning and negotiation strategies
- Budget early. If you are looking at seven-figure properties, treat the mansion tax as a standard cost. Build it into your offer strategy and cash plan.
- Clarify payer in the contract. The buyer often pays, but you can negotiate. The right allocation depends on market conditions and your priorities.
- Price awareness. A $1,000,000 price point triggers the tax, while $999,999 does not. Price strategy is a market decision, not a tax dodge, so balance pricing with buyer demand and appraisal realities.
- Multi-parcel caution. If you are considering separate contracts or closings on related properties, understand that the state can look at the overall transaction.
- Professional guidance. Bring questions to your closing attorney or tax advisor, especially for complex deals, multi-unit buildings, or unusual consideration.
How it shows up at closing
On your closing disclosure, the mansion tax appears as a line item calculated at 1% of the consideration if the price is $1,000,000 or more. Your settlement agent collects the funds and remits them with the transfer return to the state when the deed is recorded.
If the tax is not collected or is underpaid, the state can assess penalties and interest. To avoid delays in recording and potential penalties, make sure the amount and paperwork are correct before closing day.
Quick examples
- Tewksbury single-family at $1,200,000: The mansion tax is 1% of $1,200,000, or $12,000, typically paid by the buyer unless the contract says otherwise.
- Newark condo at $995,000: Below the threshold. No mansion tax. Ordinary recording fees and other closing costs still apply.
- Newark two-unit purchase at $1,050,000: The combined consideration meets the threshold, so the 1% tax applies to the full amount.
Your next steps
If you plan to buy or sell near the $1,000,000 mark in Tewksbury, Newark, or nearby communities, get in front of the mansion tax early. Confirm whether it applies, decide who will pay it, and make sure your closing team has everything ready. For authoritative state guidance, start with the New Jersey Division of Taxation. For statute language, review resources through the New Jersey Legislature website.
When you are ready to talk strategy, prioritize clear numbers and a smooth process. Reach out to me for local insight, smart negotiation, and a closing plan that reduces stress from offer to keys. Connect with Alexander Goldman-Spanja to get started.
FAQs
Does NJ’s mansion tax apply to a $999,999 sale?
- No, the mansion tax applies when the consideration is $1,000,000 or more. $999,999 falls below the threshold.
Who usually pays NJ’s mansion tax at closing?
- The buyer typically pays in local practice, but parties can negotiate and specify a different allocation in the contract.
When is the mansion tax collected and who files it?
- It is collected at closing and remitted by the closing attorney, title company, or settlement agent to the State of New Jersey.
Are condos and co-ops treated the same as houses?
- Yes, purchases of condos, co-ops, single-family, and multi-family properties can trigger the tax when the price is at or above $1,000,000.
What if a sale is split into multiple closings to avoid the tax?
- The state can look at the substance and timing of related transfers, and a combined transaction at or above $1,000,000 can still trigger the tax.
Can the mansion tax be refunded if the sale is rescinded?
- If the tax was collected and the sale is later rescinded, work with your closing agent and the Division of Taxation to review refund procedures for your situation.
Is the mansion tax the same thing as the Realty Transfer Fee?
- No, the mansion tax is separate and in addition to the Realty Transfer Fee, which has its own rules and is often a seller cost.
Will my lender cover the mansion tax for me?
- Lenders do not pay it. Mortgage proceeds may be used only if the lender allows it and it is disclosed, so confirm early with your lender.
