N.J. just raised the ‘mansion tax’ on high-value property sales. Here’s what to know.

Looking to sell your home?

If it’s in New Jersey and sells for more than $2 million, you can expect to pay tens of thousands of dollars in new fees under legislation signed into law by Gov. Phil Murphy on June 30.

The same goes for commercial property sales. The tax hike was approved by the Democratic-controlled Legislature to generate new revenue in support of the $58.8 billion state budget enacted for the fiscal year that began July 1.

Some supporters cheered the move as a progressive way to fund state programs. Yet it disappointed constituencies across the political spectrum, with advocacy group Fair Share Housing Center lamenting the revenue won’t be dedicated to affordable housing and business interests warning the tax will hurt an already struggling commercial real estate market.

Here’s what to know about the changes to the fee commonly referred to as New Jersey’s “mansion tax.”

Under current law, sellers pay a Realty Transfer Fee that varies based on the sale price and sometimes the property’s assessed value, according to the New Jersey Division of Taxation.

The state imposes an additional 1% fee on a property’s sale price for transactions that exceed $1 million — an expense paid by the buyer. The tax was established in 2004 and was initially limited to residential sales, according to law firm Riker Danzig LLP.

In his February budget proposal, Murphy, a Democrat whose term ends in January, recommended doubling that rate to 2% for purchases between $1 million and $2 million and raising it to 3% for those over $2 million.

Legislators modified that proposal, limiting the tax hike to transactions above $2 million and changing the law so that sellers, instead of buyers, pay the fee.

Lawmakers established a sliding scale, starting with a 2% fee on sales exceeding $2 million but less than $2.5 million — which means more than $40,000 in fees. The rate increases up to 3.5% for sales of more than $3.5 million.

Sen. Paul Sarlo, a Democrat and chair of the Senate Budget and Appropriations Committee, said during a June 26 hearing that the fees are expected to raise $282 million this fiscal year.

The new fees will apply to property sales starting July 10.

Murphy has said the fee increase and other tax hikes on sports betting and cigarette sales were needed to close the gap between the amount of money the state collects in taxes and the amount it spends. Even with the new taxes, though, that structural deficit is projected at $1.5 billion for the next year.

“These changes, along with the cuts in appropriations, help ensure that revenues are more closely in line with expenditures,” Murphy’s office said after the governor signed the budget into law.

Peter Chen, senior policy analyst with liberal-leaning New Jersey Policy Perspective, said the fee increase was needed at “a time when so many households are struggling to afford the cost of living.”

Republicans say lawmakers should focus on cutting spending, rather than raising taxes, to close the deficit.

New Jersey Realtors, a real estate industry group, opposed Murphy’s proposal and pointed to data showing that 16% of single-family homes sold in the state last year cost more than $1 million, up almost threefold from 2018.

But the impact will be more limited because of the Legislature’s revisions.

Chen, the policy analyst, said the changes would affect only the top 3% of property sales — both residential and commercial — in New Jersey.

The median sale price for single-family homes sold in the 12 months ended in May was $573,000, according to data compiled by New Jersey Realtors.

Business groups argued the tax will further depress a commercial real estate market that has been upended by an uptick in remote work since the pandemic.

The amount of square footage leased in the first three months of the year in North and Central Jersey declined 26% from the previous quarter, according to an office market analysis by commercial real estate services firm CBRE.

“This is further chilling our commercial real estate market, which is already chilled,” said Chris Emigholz, a lobbyist for the New Jersey Business and Industry Association.