Real Estate Taxes Involved with Buying and Selling a Home in New Jersey

If you are buying or selling a home, it's important to understand ALL of the ways you will be taxed. The tax amounts can vary depending on your residency status, whether you reside in the state year-round, part-time, or outside New Jersey, and also your marital status for the tax year.

Disclaimer: This article is for informational purposes only. For tax advice specific to your situation, always consult a qualified accountant or real estate attorney.

1. Realty Transfer Tax (RTF)

In New Jersey, the Realty Transfer Tax is typically paid by the seller. This tax is based on the property’s sale price and is due when the deed is transferred to the buyer. It must be paid before the deed can be recorded with the county clerk.

Who pays? Seller

When is it paid? At closing

Exemptions: Transfers between spouses, parents and children, as well as sales under $100, and certain senior citizen or low-income housing transactions may be partially or fully exempt.

📊 Use the NJ Realtor Realty Transfer Fee Calculator to get an estimate of the transfer tax you will need to pay on selling.

2. Graduated Percent Fee (GPF) – Replacing the Mansion Tax

Starting July 10, 2025, New Jersey replaced the old 1% Mansion Tax with the Graduated Percent Fee (GPF). Unlike the previous tax, which was paid by buyers on homes over $1 million, the GPF is paid by sellers — and it's tiered based on the sale price.

Example: If you sell a home for $1,250,000:

• GPF: $1,250,000 × 1% = $12,500

Important note: This fee creates significant thresholds. A home selling at $999,000 pays $0 in GPF, while a home at $1,000,000 pays $10,000. If you're pricing a home near these thresholds, consider the tax implications carefully.

This fee is in addition to the standard Realty Transfer Tax.

3. Capital Gains Tax

Capital gains tax applies to the profit you make when selling your property. Your profit is calculated as:

Sale Price – Purchase Price – Qualifying Improvements – Selling Costs

Example:

• Bought for $350,000 + $50,000 in renovations + $30,000 in selling costs
• Sold for $550,000
• Taxable profit: $120,000

You can deduct permanent improvements (not mere repairs): kitchen/bathroom remodels, new roof or HVAC, room additions, finished basements, new windows, deck construction. Keep all receipts.

Exemptions for primary residences:

• Up to $250,000 if filing single
• Up to $500,000 if married filing jointly

Requirements: Own for 2+ years, live in it 2 of the last 5 years as primary residence, haven't used exclusion in past 2 years.

For investment properties: Long-term gains (held 1+ year) taxed at 0%, 15%, or 20% depending on income. You can defer tax using a 1031 exchange.

4. Exit Tax

The Exit Tax is not an extra tax — it's a withholding for non-resident sellers who are selling their vacation homes or investment properties. It is not intended for New Jersey residents who are selling their primary residence to relocate out of state.

How it works:

• At closing, NJ withholds the higher of 2% of the sale price or 8.97% of the taxable gain
• When you file your NJ tax return, the amount withheld is applied toward your tax liability
• If your actual tax is less than what was withheld, you'll get a refund (typically 4-6 months later)

5. Property Taxes (For Buyers)

While not a transaction tax, property taxes are a major ongoing cost. New Jersey has some of the highest property taxes in the nation.

Middlesex County averages:

• North Brunswick: ~$10,500/year
• South Brunswick: ~$11,200/year
• East Brunswick: ~$11,800/year
• Monroe Township: ~$9,500/year

Payment schedule: Quarterly on February 1, May 1, August 1, and November 1.

At closing: Property taxes are prorated. If the seller prepaid beyond closing, you'll credit them.

Escrow accounts: Most lenders require you to pay 1/12 of annual taxes monthly with your mortgage. Expect to prepay 2-3 months into escrow at closing.

Budget tip: Add 1/12 of annual property taxes to your monthly mortgage payment. For $11,000/year in taxes, that's ~$917/month additional.

6. State and Local Tax Deduction (SALT)

In July 2025, the "One Big Beautiful Bill Act" increased the federal SALT deduction cap from $10,000 to $40,000 for the 2025 tax year. This is a major benefit for NJ homeowners given the state's high property and income taxes.

Under the new cap, you can deduct much more of your state and local taxes on your federal return, lowering your taxable income and potentially saving thousands.

Conclusion

Selling or buying a home in New Jersey isn't just about the price — taxes can significantly impact your net proceeds or total costs. Understanding these taxes helps you plan and avoid surprises at closing.