Two nearly identical Avalon homes go under contract the same month. One seller accepts $1,995,000. The other holds out for a better number and lands at $2,005,000, a $10,000 win on paper. At closing, the second seller nets about $10,150 less than the first.
That is not a typo, and it is not bad negotiating. It is New Jersey's rewritten mansion tax doing exactly what it was built to do. If you own property on Seven Mile Island and you are thinking about listing in the next year, the tier lines in this tax matter more than almost any other number in your closing statement, because Avalon's prices sit right on top of them.
What Actually Changed, and When
For twenty years, New Jersey's "mansion tax" was simple: a flat 1% fee on residential sales over $1 million, paid by the buyer at closing. That ended on July 10, 2025, when a budget bill signed by Governor Phil Murphy shifted the entire obligation to the seller and replaced the flat rate with a graduated schedule that climbs as high as 3.5%.
There was a brief grace period for deals already under contract. Sellers with a fully executed agreement before July 10, 2025 could still qualify for the old 1% rate, as long as the deed recorded by November 15, 2025. That window closed months ago. Every Avalon listing that goes to contract from here forward falls under the new rules, full stop.
The fee now goes by an official name, the Graduated Percent Fee, though most agents and attorneys still call it the mansion tax out of habit. Sellers submit a specific form, the RTF-1EE, alongside the deed at recording. It stacks on top of the standard Realty Transfer Fee that New Jersey sellers have always paid, it does not replace it.
The Schedule Itself
Here is the rate structure, applied to the full sale price, not just the portion above each threshold:
| Sale Price | Rate |
|---|---|
| $1,000,000 to $2,000,000 | 1% |
| $2,000,000 to $2,500,000 | 2% |
| $2,500,000 to $3,000,000 | 2.5% |
| $3,000,000 to $3,500,000 | 3% |
| Above $3,500,000 | 3.5% |
That last clause is the part that trips people up. This is not an income-tax-style bracket where only the money above a line gets taxed at the higher rate. Cross the line by one dollar and the higher rate applies to every dollar of the sale.
Why Avalon Sits Right on the Fault Line
This would be an academic point in a town where most homes sell for $600,000. Avalon is not that town.
As of July 2026, Zillow's tracking put the average Avalon home value at $2.71 million, up 3.5% over the prior year. That figure alone sits inside the 2.5% tier. But the "typical" Avalon sale moves around more than that single number suggests. Houzeo reported a median sale price of $2.38 million in March 2026, which lands in the 2% tier. Movoto reported a median of $3.145 million in February 2026, which lands in the 3% tier. Same town, different months, different tax brackets entirely.
At the top of the market, the exposure gets serious. Local market trackers point to a bayfront sale on Flamingo Drive that closed at $11.6 million, described as the highest price ever paid for a non-beachfront property in Avalon. Run that number through the current schedule and the tax alone comes to roughly $406,000, on top of the standard Realty Transfer Fee that still applies underneath it.
Most Avalon sellers are not selling an $11.6 million bayfront estate. But a meaningful share of the borough's inventory sits inside the $2 million to $3.5 million band where every tier line lives, which means the cliff effect is not a rare edge case here. It is closer to the default situation.
The Cliff, in Real Numbers
Go back to the two sellers from the opening. Seller A closes at $1,995,000, comfortably inside the 1% tier. The tax comes to $19,950. Net of that fee, the sale delivers $1,975,050.
Seller B closes at $2,005,000, ten thousand dollars higher on paper, but that ten thousand dollars pushes the entire sale into the 2% tier. The tax comes to $40,100, more than double. Net of that fee, the sale delivers $1,964,900, over $10,000 less than Seller A walked away with.
The same math shows up at every threshold in the schedule. A $2.99 million sale sits in the 2.5% tier and owes $74,750. Push that same sale to $3.01 million, a $20,000 gain, and it crosses into the 3% tier, owing $90,300. The seller gained $20,000 on the sale price and lost $15,550 more to tax than that gain covered.
None of this means a higher offer is bad. It means the number on the contract is not the number that matters. The number that matters is what lands in your account after the state takes its cut, and near a tier line, those two numbers can move in opposite directions.
What This Changes About How You Price and Negotiate
A few practical shifts follow from this, and they are worth walking through before you set a list price, not after an offer lands on the table.
Model net proceeds at your actual expected sale price before you list, not at a round number that sounds clean. If your home is likely to sell somewhere between $2.4 million and $2.6 million, you want to know exactly what the tax looks like at $2,490,000 versus $2,510,000, because that gap crosses a tier.
Treat offers near a threshold differently than offers in the middle of a tier. A buyer's $20,000 bump above asking is not automatically worth taking if it pushes you across a line. Sometimes the better outcome is holding the line just under the threshold, even if it means leaving a modest gain on the table.
Remember that buyers are negotiating with a different set of numbers than they used to. They no longer owe the 1% fee that used to sit on their side of the closing statement, which can make them a little more willing to push on price, since they are not budgeting for a tax bill of their own. That shift in psychology is worth factoring into how you read an offer.
Get the net proceeds conversation started early, not during attorney review. The seller's attorney typically prepares the RTF-1EE and calculates the fee at recording, but you want that number in hand before you accept a contract, not after.
A Few Questions I Get About This
Does this replace the Realty Transfer Fee I already knew about? No. The standard RTF still applies to every sale, and the Graduated Percent Fee sits on top of it for sales over $1 million. Both come out of your proceeds at closing.
Is there any discount for longtime owners, seniors, or veterans? The standard RTF has long offered a partial exemption for owner-occupied sellers who are 62 or older, blind, or permanently disabled, on the first $150,000 of the sale price. The Graduated Percent Fee does not carry that same provision. It applies at the same rate regardless of the seller's age or how long they have owned the property.
What if I'm mid-negotiation right now? The transition window for the old flat 1% rate closed on November 15, 2025. Any contract signed since then falls entirely under the new schedule, with no refund path back to the old rate.
Does this apply if I hold the property in an LLC? New Jersey also revised the Controlling Interest Transfer Tax to mirror this new schedule and shifted that obligation to the seller as well. If you hold Avalon property through an entity rather than in your own name, talk to your attorney about how that overlay applies to your specific structure before you list.
None of this is tax or legal advice, and the specifics of your situation depend on how your sale is structured. A real estate attorney or accountant should run your exact numbers before you sign anything.
What I can tell you from twenty-three years of closing deals on this island is that the sellers who come out ahead are the ones who know their number before the offer arrives, not after. If you are weighing a sale on Seven Mile Island and want to talk through what your specific price point actually nets you under the current rules, I am happy to walk through it with you. Reach out to Joseph Butler and let's connect.
