Mansion tax

A mansion tax is an additional transfer tax that applies above a price threshold. The defining feature is the cliff structure, once the sale price clears the threshold, the rate applies to the entire sale price, not just the amount above the threshold. A $999,999 home in New York pays no mansion tax; a $1,000,000 home pays 1% of the full $1M, or $10,000.

How it works: New York's mansion tax applies to residential properties at $1M+, paid by the buyer, scaling from 1% at $1M up through 3.9% at $25M+. New Jersey's mansion tax was restructured by the FY 2026 budget (effective deeds recorded on or after July 10, 2025), it's now seller-paid and tiered: 1% on $1M+, 2% on $2M+, 2.5% on $2.5M+, 3% on $3M+, and 3.5% on $3.5M+. Each rate applies to the entire sale price.

Why it matters: mansion taxes can produce material tax bills on the cusp of a threshold. A buyer at $1,000,001 in NYC pays $10,000 more in mansion tax than a buyer at $999,999, a transparent cliff. In NJ post-2025, a seller at $2,000,001 pays $40,000 more than at $1,999,999. The cliff structure incentivizes negotiation around the thresholds.

Common gotcha: the cliff isn't progressive, it doesn't apply only to the marginal amount above the threshold. A buyer who closes at exactly $1,000,000 in NYC owes $10,000 of mansion tax, not $0. Sellers and buyers near these thresholds sometimes negotiate the price slightly under the threshold to avoid the tax, particularly when the gap is small.