NJ 'Mansion Tax' Looms Over Prospective Homeowners

NEW JERSEY - The budget for New Jersey's next fiscal year that begins on July 1 brings with it new taxes that would put residents on the hook when buying a home.

The existing one percent fee on houses and buildings that sell for over $1 million would jump to two percent in an effort to close the margin between government tax money collections and the actions funded by that same money each year. The hike could also force some prices down and help with the inventory of more affordable homes, and the ever-evolving post COVID-19 commercial market.

The fee is unofficially called the "mansion tax," and this new version would also establish a fee on properties sold for over $2 million, a three percent tax also paid by the buyer.

According to a study by nonprofit advocacy group New Jersey Policy Perspective (NJPP), New Jersey woiuld be able to raise a collective $4 billion more per year if they move forward with different ways to get more from its wealthier residents.

The study, also contributed to by the Institute on Taxation and Economic Policy, calls on the state to raise its taxes on richer residents and corporations, up its sales tax and revamp its tax code. The findings also showcase the belief that another $4B to the state would be enough to enable all children to have free meals in public schools, restore state aid to schools that are being forced to cut staff and programs, and cover the entire shortfall in the state budget.

In February, the New Jersey Realtors association, came out and condemned Murphy's proposal, pointing out that "While a $1 million home has traditionally been considered a luxury property, the reality is that inflation and the dramatic rise in home prices have placed that price tier firmly in the middle class for many parts of New Jersey.

New Jersey is a high-cost state and affordability has become a significant concern considering the average sales price for single-family home rose to $698,804 in 2024. Comparatively, that number was $309,000 in 2014."

Murphy's propsed budget for 2026 does allocate $4.3 billion for property tax relief programs that are supposed to help offset costs through projects like ANCHOR, Senior Freeze and Stay NJ.

According to the Rowan University Center for Public Policy:

• The StayNJ program and the expansion of the ANCHOR program are projected to grow from $2.67 billion to $3.85 billion in Current Services Budget scenario costs over the four fiscal years, with the largest single-year cost growth of $900 million for StayNJ coming in the FY2027 budget.
• The StayNJ program, combined with the other programs, would provide 15 50 percent property tax cuts up to a maximum of $6,500 for senior citizens and the disabled starting in FY2027. With funding set aside the two previous years, seniors and the disabled would receive a StayNJ half-payment up to $3,250 in the spring of 2026.

The average property tax bill in New Jersey topped $10,000 for the first time last year, rising to $10,095, according to the Department of Community Affairs. Patch found that the small borough of Tavistock, in Camden County, had the highest average taxes at $37,908, with an average property value of $2.64 million.

Data available from Zillow for the month of April 2025 shows new single-family homes on the rise nationwide, both month-over-month and year-over-year. The 743,000 homes sold in April were a 10.9 percent crease from March, and a three-point-three percent increase from 2024, according to the U.S. Census Bureau.

As of April, New Jersey had the third-highest amount of cities with "starter homes" that cost $1 million or more in the United States. A “starter home” refers to properties in the lowest third of home values in a given region.

MORE FROM PATCH:
1. Property Taxes Went Down In These 31 NJ Towns
2. Race, Wealth And Homeownership: New Jersey Still Seeing Troubling Gaps