Voters who live in the City of Los Angeles passed Measure ULA, often called the “Mansion Tax,” and it took effect April 1, 2023. Measure ULA applies a transfer tax to all real estate sales within the city of $100 or more.

The base tax on real estate sales in the City of Los Angeles is .45%, which is the amount the City will assess on sales up to $5 million. Between $5 million and $10 million, the City adds another 4% for a total of 4.45%. Over $10 million, the rate goes up to $5.95%.

Mansion Tax amounts are significant

A mansion that sells for $5 million would pay $222,500 in a transfer tax to the City, with the proceeds intended to pay for more affordable housing. A $10 million property would pay $595,000.

The “Mansion Tax” has affected luxury residential real estate in the City of Los Angeles. In the first quarter of 2023, several celebrities sold mansions for over $50 million. When the tax took effect on April 1, listings for ultra-high-value residential properties dropped.

Who pays the Mansion Tax?

Measure ULA specifies that property sellers are responsible to pay the Mansion Tax. This is a contrast to similar taxes in other big cities like New York, where buyers pay the transfer tax. Because some sellers with high-priced properties may not have a lot of liquid cash, a number of area realtors and low-tax advocates say that the tax disproportionately harms older people who may be downsizing or otherwise need to move.

Alternatives to the Mansion Tax

Other cities in Los Angeles County aren’t subject to the Mansion Tax, including Beverly Hills and Malibu. Los Angeles County has a transfer tax rate of .11%, much less than the City of Los Angeles.

If you’re considering a high-priced property in the city of Los Angeles, you may have more limited choices because of Measure ULA. However, other cities within the county aren’t affected. Most of the publicity surrounding the Mansion Tax focuses on high-end luxury real estate, but the measure also affects all commercial and multifamily property sales.

There are likely to be ramifications of Measure ULA continuing for years. California Platinum Realty and California Platinum Loans are on top of real estate trends in the LA/Orange County area and can steer you toward the deals and properties that are optimal for your finances and your future.

Sources:

City of Los Angeles. “Real Property Transfer Tax and Measure ULA FAQ,” url: https://finance.lacity.gov/faq/real-property-transfer-tax-and-measure-ula-faq

Eltorai, Omar and Sandi Prendergast. “What are real estate transfer taxes?” Altus Group, 2 March 2023, url: https://www.altusgroup.com/insights/us-real-estate-transfer-taxes-understanding-the-impact/

Meares, Hadley. “The Mansion Tax Effect: Luxury Home Sales Stall in Los Angeles,” The Hollywood Reporter, 15 July 2023, url: https://www.hollywoodreporter.com/lifestyle/real-estate/mansion-tax-luxury-home-sales-los-angeles-1235535477/