NJ Mixed-Use Real Estate: A Tax Game Changer
Part of our job is knowing when a legal development changes something important for our clients.
This is one of those moments.
A New Jersey Tax Court just issued the first ruling that establishes a clear standard for classifying mixed-use properties — buildings that combine commercial space (retail, office) with residential apartments.
The standard is called the Predominant Use Test. If the majority of a building’s square footage and income comes from residential use, it should be classified as an apartment building, not a commercial property.
That classification difference is the difference between owing the Mansion Tax and not owing it.
Here’s why that’s significant today:
Since July 2025, New Jersey sellers, not buyers, are responsible for the Mansion Tax on properties over $1M. Rates now go up to 3.5% of the total sale price. On a $3 million mixed-use building, that’s up to $105,000 coming out of your proceeds at closing.
The ruling in One Main St. Edgewater, LLC v. Edgewater Borough saved the seller nearly $2 million.
If you own or have recently sold a mixed-use property in New Jersey, this is worth a conversation with a real estate tax attorney.
If you want to talk through whether your property might be affected, reach out directly. That’s what we’re here for.
