When talking to those looking to sell their homes in Tenafly, there's a question that often comes up these days: Is it true that the mansion tax is now the seller's responsibility?

To put it simply, yes, that is correct. However, understanding the numerical structure is crucial to avoid complications in pricing strategy.

New Jersey revised the so-called mansion tax in the state budget bill signed on June 30, 2025. The new regulations will take effect on July 10, 2025.

The biggest change is who pays the tax. Previously, buyers purchasing homes over $1 million paid 1%, but now it is the sellers who are responsible.

The name has also changed. It is officially referred to as the Graduated Percent Fee, and the tax rate has shifted from a flat 1% to a tiered structure.

The tiers are as follows: For homes priced over $1 million but less than $2 million, the rate is 1%.

For homes priced over $2 million but less than $2.5 million, the rate is 2%, and for those over $2.5 million but less than $3 million, it is 2.5%.

For homes priced over $3 million but less than $3.5 million, the rate is 3%, and for homes over $3.5 million, it is 3.5%.

Many people misunderstand this aspect. Unlike income tax, where only the amount exceeding a bracket is taxed at a higher rate, the entire transaction amount is subject to the tiered rate applicable to that range.

Calculating this shows a significant difference. If you sell for $2 million, the tax is 1%, which amounts to $20,000.

However, if you sell for $2.02 million, the 2% rate applies to the entire amount, resulting in $40,440. So, trying to get an additional $20,000 actually increases your tax by $20,400, leaving you with less money in hand.

If you have a home that slightly exceeds $3.5 million, the difference is even greater. At $3.5 million, the tax is 3%, totaling $105,000, but if you go just $1 over, the 3.5% rate applies to the entire amount, resulting in $122,500.

Thus, pricing just above the tier boundary can be detrimental for sellers. When setting the listing price, it's essential to consider this boundary. If your agent doesn't bring it up first, you should ask them directly.

This is separate from the existing Realty Transfer Fee that New Jersey sellers have traditionally paid, and this law change does not alter the base rate itself.

So why is this topic frequently discussed in Tenafly? It's because a significant number of single-family homes in this area exceed $1 million.

The median sale price varies widely across different sources. Data from Redfin, Zillow, ATTOM, and others can differ significantly based on the reference point and calculation methods, making it difficult to pinpoint a specific number.

However, all sources agree that transactions exceeding $1 million are common. Therefore, it's realistic to assume that most sellers will fall into at least the 1% tier.

Even within Tenafly, circumstances differ. Older colonial homes closer to downtown often end up in the 1% tier. This makes calculations relatively straightforward.

In contrast, newer or remodeled homes on larger lots in the hills often fluctuate around the $2 million and $3 million thresholds. For these homes, calculating the boundary becomes crucial.

The timing of the contract also matters. Sellers who completed contracts before July 10, 2025, and finalized their registrations by November 15, 2025, could apply for a refund on the portion exceeding 1%.

This refund window has already passed. Those currently listing their homes will be subject to the new tier structure.

Therefore, I recommend that sellers follow this order of checks: First, see which tier your expected sale price falls into.

Next, if you're just above a boundary, consider whether slightly lowering the price would be more beneficial for your net profit. Then, calculate the actual amount you'll receive, including the Realty Transfer Fee and brokerage commission.

Negotiations with buyers may also change. Previously, buyers paid 1%, which was reflected in the price, but now that burden has shifted to sellers, which should be taken into account during negotiations.

In fact, there has been significant pushback from the industry regarding this policy. The New Jersey Realtors Association has opposed it since its inception, arguing that it increases transaction costs.

From the state government's perspective, they likely needed the revenue, but the abrupt tax increase at the boundary is frankly a bit harsh. It can lead to a phenomenon where prices cluster just below the boundary.

This article is based on the 2025 revised law and accompanying legal materials. There may be further amendments, so please verify the latest standards with the New Jersey Division of Taxation and your attorney before closing.

If I were a seller, I would keep the tier chart handy when setting the price. For homes where a few thousand dollars can change the tax bracket, that calculation can make a bigger difference than a renovation.