Gov. Phil Murphy is proposing in his new budget to increase the tax on real estate sales over $1 million, aiming to pull an extra $322 million into the state’s coffers.
Under the proposal, which would have to survive negotiations with the Legislature, the current real estate transaction fee paid by the seller would remain in effect. That fee is set on a sliding scale depending on the total value of the transaction. The current scale for the seller puts a $1-million-plus property at $6.05 per $500 of value.
Murphy’s change comes in the supplemental fee paid by the buyer. That fee, euphemistically termed by many as the “mansion tax” on transactions of $1 million or more, currently stands at 1% of the value. What the governor proposes is doubling the tax on homes sold for $1 million to $2 million, taking it from 1% to 2%. In addition, the tax would move to 3% for transactions over $2 million.
What would a hike in the mansion tax mean for Cape May County?
According to data from the county Clerk’s Office, 2024 saw 1,548 real estate transactions in excess of $1 million in Cape May. Of those, 62% fell in the range of $1 million to $2 million. That left 38%, or nearly 590 transactions, in the over $2 million category, where the tax would increase to 3%.
According to Zillow, the average home value in Cape May County over the past year was $658,348, up 6% for the year. The median list price for homes for sale in January 2025 was $829,992.
Estimates are that the current base transfer fee, the amount per $500 of value, will pull in $500 million by the end of the current fiscal year. The supplemental fee of 1% on transactions over $1 million is expected to deliver $232 million to the state treasury this year.
If Murphy’s proposal is approved for the budget year that begins July 1, the expectation is that it will draw in an additional $322 million.
Added all together, the transferring of real estate in New Jersey could become a $1-billion-plus source of revenue for Trenton.
Even if the proposal is approved, the new state budget, with a record $58 billion in spending, would still run a deficit, and would still require the use of surplus funds to come into legal balance.
NJ Realtors, the state branch of the National Association of Realtors, has condemned the proposal, saying it will make it harder to buy a home. Republicans in the Legislature have blasted the proposed tax increase, saying it will hurt the state’s economy.
Murphy’s proposal is part of a package of tax increases on items that range from tobacco products, cannabis and alcohol to gambling and firearms. The package includes an expanded reach of items subject to the state sales tax.
The state needs its fiscal year 2026 budget signed into law by June 30.
Readers interested in the complex list of realty transfer fees based on transaction value can find it here.
Contact the reporter, Vince Conti, at vconti@cmcherald.com.
