States have a problem. As costs and expenses rise, they must find new ways to raise revenue that is politically palatable that the taxpayers can live with. What is a state like New Jersey to do when it is staring at a $1.2 billion budget deficit? It already has exceedingly high property taxes. The sales tax is 6.625%. The highest income tax rate is 10.75%. New Jersey voters are extremely sensitive to tax rate hikes – most feel that the tax burden they face is plenty high enough. Nevertheless, that deficit has to be filled in order to balance the budget. A proposal put forth by the Governor to extend the sales tax to mini-golf, bowling, batting cages, laser tag and other entertainment proved to be very unpopular and had to be dropped. So what was New Jersey's solution?
New Jersey primarily raised three taxes – the Mansion Tax, tax on sports betting activities and the cigarette tax. Let's take a look.
Mansion Tax
For quite some time, there has been an additional tax of 1% for homes in New Jersey that sold for $1 million or more. The new bill (S4666) adds four more tiers as follows:
Sale Price and Mansion Tax Rates:
| Sale Price | Mansion Tax |
| $1 million to $2 million | 1.0% |
| Over $2 million to $2.5 million | 2.0% |
| Over $2.5 million to $3 million | 2.5% |
| Over $3 million to $3.5 million | 3.0% |
| Over $3.5 million | 3.5% |
Need to Know
This tax is imposed on the seller of the property. The new tax applies to real estate contracts executed on or after July 10, 2025. For the tax NOT to apply the contract would have had to have been executed before July 10, 2025 AND the deed must be recorded prior to November 15, 2025. These rules apply to residential property, farm property (regular) and Class 4A commercial property. There are more rules and details that may have to be considered, depending on the nature of your transaction.
Sports Betting Activities
Online sports betting and internet gaming have been subject to a tax of 13% and 15% respectively in New Jersey. The original budget proposal from the Governor's office raised this tax to 25%. Effective July 1, 2025, both of these taxes have been raised to 19.75% (S3064).
Cigarette Tax
The 13.5 cents tax per cigarette has been increased to 15 cents per cigarette. For a pack of 20 cigarettes, this means that $3 of the price paid for that pack is the cigarette tax. The 10-cent liquid nicotine tax on wholesalers and distributors increases to 30 cents per fluid milliliter. These provisions take effect on August 1, 2025 (S4659/A4661).
Understanding Your Tax Obligations
These new tax changes represent significant shifts in New Jersey's revenue strategy that could impact your financial planning and real estate decisions. The mansion tax increases particularly affect high-value property transactions, while the sports betting and cigarette tax changes touch different sectors of the economy. Staying informed about these changes and their specific application to your situation is critical for proper compliance and planning.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
