Are you buying or selling near the $1 million mark in Pennington? The New Jersey “mansion tax” can catch people off guard if you have not planned for it. You want a clear answer on whether it applies, who pays it, and how it will show up on your closing statement. This guide breaks it down in simple terms so you can move forward with confidence. Let’s dive in.
What the NJ mansion tax is
New Jersey charges a 1% transfer tax on residential real estate when the total consideration is $1,000,000 or more. Many people call it the “mansion tax.”
In everyday transactions, this covers single-family homes, condos, and other residential properties. Nonstandard transfers can be fact specific, so your attorney and title company should confirm treatment for unique deals.
Although there is periodic discussion about changing the rules, the commonly applied standard today is 1% at $1,000,000. Because laws can change, confirm current guidance with your closing team before you sign.
How the tax is calculated
The mansion tax is straightforward math: 1% of the total consideration for the transfer. “Consideration” is broader than just the sticker price.
What counts as consideration
The total consideration typically includes:
- The contract purchase price.
- Any assumed mortgage or debt that is part of the deal.
- Any non-cash consideration that is specifically included in the agreement.
This matters if you are close to the $1,000,000 threshold. For example, assuming debt can push a sub‑$1 million price into taxable territory. Credits or concessions can also affect the reported consideration. Your title agent and attorney should confirm which items the state counts in your situation.
Quick examples
- $1,000,000 purchase price → $10,000 mansion tax.
- $1,250,000 purchase price → $12,500 mansion tax.
- $950,000 price plus assumption of a $50,000 mortgage → total consideration $1,000,000 → $10,000 mansion tax. Treatment is fact sensitive, so verify with your closing team.
For budgeting, a handy rule is: every additional $100,000 in price adds $1,000 to the mansion tax.
Who pays and how it shows at closing
In New Jersey, the buyer customarily pays the mansion tax at closing. The tax is collected by the title company or closing attorney and remitted to the state as part of your closing package.
The parties can negotiate who bears the cost in the contract. If the contract assigns payment to the seller, the closing team will still collect the funds and show them on the closing statement according to the agreement.
On your closing statement
You will see the mansion tax as a separate buyer charge on the HUD-style closing statement. It is different from:
- Seller-side realty transfer fees.
- Broker commissions.
- Title insurance, recording charges, or lender fees.
If you are financing, your lender will expect the tax to be paid at or before funding. Confirm with your lender and closing attorney whether you need to bring those funds in addition to your down payment and closing costs.
Impact on seller net proceeds
Since buyers typically pay the mansion tax, it does not reduce a seller’s proceeds unless the parties negotiate otherwise. With higher closing costs in play, buyers sometimes request credits. Sellers should plan for that possibility during negotiations.
Pennington specifics and local costs
Pennington is in Mercer County. There is no separate municipal mansion tax in Pennington. You should expect standard county recording fees through the Mercer County Clerk, plus routine local closing charges. Your title company can estimate current recording fees and include them in your closing disclosure.
Planning your budget near the $1M line
If you are considering a Pennington home around the threshold, it pays to budget early. A few simple steps can prevent last-minute surprises:
- Ask your agent and attorney to estimate total consideration, not just purchase price.
- If your offer is $1,100,000, plan for a $11,000 mansion tax line item.
- If you expect any assumed debt, credits, or non-cash items, confirm how they affect the taxable base.
- Keep a cushion for lender, title, and recording fees in addition to taxes.
Contracts, financing, and lender requirements
- Contract terms can shift who bears the cost, but the tax itself is still due based on the reported consideration.
- Lenders usually require proof that the mansion tax is paid at closing. The title company will collect and remit funds as part of its standard process.
- If you need a seller credit to offset closing costs, raise it early in negotiations so both sides can plan the net numbers correctly.
Documentation and where to verify
Your closing team will prepare and file the state transfer forms and remit the mansion tax. Keep these items for your records:
- The deed, affidavit of consideration, and state transfer forms showing the reported consideration and tax paid.
- The closing statement with the mansion tax listed as a buyer charge.
- Proof of remittance from the title company or attorney.
If you want to double-check the latest rules or forms, ask your closing attorney or title company to pull current guidance from the New Jersey Division of Taxation. For recording fees and procedures, they can confirm with the Mercer County Clerk. Industry groups such as the New Jersey Land Title Association, New Jersey Bar Association (real estate section), and New Jersey Association of Realtors also publish useful summaries.
For federal income tax purposes, transfer taxes paid by a buyer are generally added to cost basis, not deducted as an expense. Always consult your CPA for your specific tax treatment.
Common pitfalls to avoid
- Counting only the sticker price and missing items that increase consideration, such as assumed mortgages.
- Relying on informal assurances about who pays instead of the signed contract language.
- Underbudgeting closing funds and scrambling to cover the 1% at the table.
- Using outdated online summaries. Always have your closing team verify current Division of Taxation guidance.
When to consult the pros
You should reach out early if:
- Your offer price is near $1,000,000 or your deal includes any assumed debt or concessions.
- You want to negotiate who pays and how that will be shown on the closing statement.
- You need clarity on tax reporting, basis, or timing of payment.
Your attorney and title company handle the mansion tax every day and can confirm how the rules apply to your specific transaction. A CPA can advise on how to treat the payment for your tax returns.
Final thoughts
The mansion tax is simple in concept but easy to overlook in a fast-moving deal. If you plan for 1% of total consideration at $1,000,000 and above, confirm who pays in your contract, and have your closing team verify the details, you will avoid surprises and keep your Pennington closing on track.
If you are weighing a purchase or sale near the $1 million mark in Pennington, connect with Helen Sherman for clear guidance, precise budgeting, and a seamless closing experience.
FAQs
What is the New Jersey mansion tax for Pennington buyers?
- It is a state transfer tax of 1% applied when total consideration for a residential purchase is $1,000,000 or more, typically paid by the buyer at closing.
How is the NJ mansion tax calculated at closing?
- The tax equals 1% of total consideration, which can include purchase price, any assumed mortgage, and certain non-cash items listed in the contract.
Who usually pays the mansion tax in Mercer County?
- The buyer customarily pays at closing, although the parties can negotiate who bears the cost in the contract.
Does Pennington add a local mansion tax surcharge?
- No, there is no separate municipal mansion tax in Pennington; expect only standard county recording fees through the Mercer County Clerk.
How will the mansion tax appear on my closing statement?
- It shows as a buyer charge on the HUD-style closing statement, separate from title fees, lender charges, and seller-side realty transfer fees.
What if my Pennington purchase is $950,000 but I assume a $50,000 mortgage?
- The assumption may count as consideration, bringing total consideration to $1,000,000 and triggering a $10,000 mansion tax; confirm with your title and attorney.
Can a seller pay the mansion tax instead of the buyer?
- Yes, the parties can agree in the contract for the seller to cover it, and the closing team will collect and reflect that on the closing statement.
How does the mansion tax affect my taxes after closing?
- For buyers, transfer taxes are generally added to the property’s cost basis rather than deducted in the year paid; consult your CPA for specifics.
