Upon the sale of residential real estate, many Sellers are surprised to learn that the transfer is subject to a New Jersey Realty Transfer Fee. This is a tax imposed on Sellers by the State of New Jersey pursuant to N.J.S.A. 46:15-5 et seq. In certain instances the amount can be significant.
First enacted in 1968, and comprised of a modest fee, the Realty Transfer Fee law has been amended several times, most recently in 2004. Each time, not surprisingly, the Realty Transfer Fee has been increased on higher priced real estate.
The Realty Transfer fees are calculated on a sliding scale, with the rate per $500.00 of sales price increasing as the sales price increases. The table below summarizes the standard rates:
Sales Price Realty Transfer Fee
$500.00 to $350,000.00 $2.00 to $2,105.00
$350,000.00 to $1.0 million $2,105.00 to $9,575.00
$1.0 million to $2.0 million $9,575.00 to $21,675.00
and $6.05 per $500.00 in excess of $2.0 million
A reduced Realty Transfer Fee is available to senior citizens, blind persons, and disabled persons on the sale of one-or two-family residences which they own and occupy, and on the sale of low and moderate income housing.
Those reduced fees are:
Sales Price Realty Transfer Fee
$500.00 to $350,000.00 $.50 to $650.00
$350,000.00 to $1.0 million $650.00 to $4,675.00
$1.0 million to $2.0 million $4,675.00 to $11,475.00
and $3.40 per $500.00 in excess of $2.0 million
Certain deed transfers are exempt from the Realty Transfer Fee under N.J.S.A. 46:15-10. The most common of these are:
• Deed for consideration of less than $100.00;
• Deed between husband and wife, or parent and child;
• Deed by an executor or administrator of a decedent to a devisee or heir to effect distribution of the decedent’s estate in accordance with the decedent’s will or the intestacy laws;
• Deed recorded within 90 days following the entry of a divorce decree which dissolves the marriage between the grantor and grantee;
• Deed conveying a cemetery lot or plot;
• Deed in specific performance of a final judgment;
• Confirmatory or corrective deed; and
• Deed of a receiver, trustee in bankruptcy or liquidation, or assignee for the benefit of creditors.
In 2004, legislation was also passed requiring non-resident Sellers to file an estimated Gross Income Tax on the transfer of real property as a condition to recording the transfer. The estimated Income Tax payment is determined by multiplying the Seller’s gain, as computed for tax purposes, times the highest Gross Income tax rate of 8.97%. However, in no case may the estimated payment be less than 2% of the sales price paid.
Finally, there is a Realty Transfer Fee due from the Buyer for purchases of residential property in excess of $1.0 million. This is commonly referred to as the “Mansion Tax” and is 1% of the purchase price. Thus, if the “Mansion Tax” applies, the minimum transfer tax paid by the Buyer is $10,000.00.
