Is the New Mansion Tax Hitting Los Angeles Homeowners Hard?

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Is the New Mansion Tax Hitting Los Angeles
Homeowners Hard? "I need to sell my house fast in
Los Angeles, CA, but I'm curious about the new
Mansion tax." In early 2023, Los Angeles
experienced a surge in luxury real estate deals
ahead of the arrival of Measure ULA, commonly
known as the 'mansion tax,' which came into
effect on April 1. This tax, in addition to
regular property and capital gains taxes, applies
to homes sold after that date. If you're a Los
Angeles homeowner with questions about this tax,
don't worry we're here to provide
answers! What Is the New Mansion Tax in Los
Angeles? Los Angeles voters approved Measure ULA,
known as the Homelessness and Housing Solutions
Tax, in November 2022. This Measure amended Los
Angeles Municipal Code 21.9.2, also called the
Real Property Transfer Tax Ordinance. The primary
goal of Measure ULA is to generate revenue for
affordable housing and homelessness prevention.
Initially estimated to raise over 1.1 billion,
it's now projected to yield 672 million. The tax
will continue until Los Angeles voters decide to
repeal it. How Does the LA Mansion Tax Work? The
mansion tax applies a 4 percent tax to property
sales of 5 million or more and a 5.5 percent
tax to properties sold for 10 million or
more. Who Pays the Los Angeles Mansion
Tax? Sellers are responsible for paying the
mansion tax. For example, on a 10 million home,
this means an additional 550,000 tax,
regardless of whether you profit from the
sale. Is This Local Tax Deductible? Federal tax
deductions for state and local taxes (SALT) are
currently capped at 10,000, regardless of your
marital status. If you're facing a transfer tax
starting at 200,000 for a 5 million home, it's
unlikely to yield a useful federal tax
deduction. Are There Any Exemptions for the ULA
Tax? Yes, as per Los Angeles office of finance,
measure ULA offers exemptions. The ULA Tax won't
apply to real property transactions in the City
of Los Angeles if the transferee falls under
newly added sections 21.9.14 and 21.9.15 of the
Los Angeles Municipal Code ("LAMC"). Will the
ULA Tax Value Thresholds Be Adjusted
Annually? According to Measure ULA, the value
thresholds for applying the ULA Tax and its
corresponding rates will be annually adjusted
based on the Bureau of Labor Statistics Chained
Consumer Price Index. However, changes in these
thresholds are not expected until the 2024
calendar year. Will the Mansion Tax Keep Pace
With Inflation? As per Forbes, there is one
silver lining to this situation the 5 million
and 10 million thresholds will be adjusted
annually to account for inflation. This
adjustment aims to prevent the
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average homeowner in Los Angeles from falling
into the tax bracket due to property appreciation
in the coming years. It's important to mention
that this newly introduced mansion tax comes on
top of the existing 0.56 combined documentary
transfer taxes that apply within the City and
County of Los Angeles (including a 0.11 County
Documentary Transfer Tax and a 0.45 City
Documentary Transfer Tax). As a result, it
represents a substantial increase in the overall
expenses associated with real estate transactions
in Los Angeles. Having Trouble Selling Your
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