Significant Tax Changes for Homeowners in Los Angeles and Santa Monica
What to Know About the ULA "Mansion Tax"
LA voters approve mega mansion tax of up to 5.5% on property deals over $10 million to help raise more than $1 billion for affordable houses
- Almost 58 percent of LA County voters supported measure of Proposition ULA
- It will see property deals between $5million and $10million taxed 4 percent, and mega mansion deals worth over the $10 million taxed 5.5 percent
- Funds will go to affordable housing and measures to lower homeless rates
- Measure ULA applies to both residential and commercial real property sales valued at $5M or more in the city of Los Angeles.
- The tax rate is 4% on properties sold for $5 million or more but less than $10 million, and 5.5% on properties sold for $10 million or more.
- It is an additional transfer tax and does not replace nor modify the existing transfer taxes.
- It applies to the gross sales value and there is no reduction for existing debt at the time of sale (which is not the case in respect of the normal transfer tax).
- It takes effect on April 1, 2023 and will apply to property transfers on or after that date.
- The tax thresholds of $5 million and $10 million will be adjusted for inflation each year.
- incorporated cities such as Calabasas, Hidden Hills, Beverly Hills and Malibu are not included. (check with your accountant and real estate advisor regarding your area)
Are you a homeowner living in Los Angeles or Santa Monica? If so, there are important tax changes you should be aware of. On April 1st, 2023, Measure ULA, a new tax law, will take effect. Additionally, on March 1st, 2023, Measure GS—a tax law specific to Santa Monica—will also go into effect. Let’s break down the details of both measures.
Measure ULA is a one-time tax that will apply to all properties sold in the City of Los Angeles at $5 million or above. Properties sold at $10 million or above will incur an additional 5.5% tax. It applies to residential and commercial real estate; however, incorporated cities such as Calabasas, Hidden Hills, Beverly Hills and Malibu are not included. At the point of sale, the one-time tax will be deducted through escrow regardless of whether the seller is taking a loss on the property or not.
Measure GS is a one-time tax specific to homeowners in Santa Monica only. This measure applies to properties sold at $8 million or above and incurs an additional 5.6% tax on top of other taxes that may apply to your home sale transaction. As with Measure ULA, this measure applies to both residential and commercial real estate but does not apply to incorporated cities such as Beverly Hills and Malibu. The one-time tax will be deducted through escrow regardless of whether you are taking a loss on the property or not.
If you are considering selling your home in either Los Angeles or Santa Monica anytime after these dates have taken effect (April 1st for LA and March 1st for SM), you must factor these taxes into your decision-making process when it comes to selling your home or investment property in either city. Make sure you understand how they could affect your bottom line before deciding when you should sell your property! In addition to understanding these laws thoroughly, work with an experienced real estate professional who can help guide you through any questions or concerns!
Are you thinking about selling your home in the city of Los Angeles or Santa Monica in 2023? These new laws may impact you; please contact Frontgate Real Estate today for an initial consultation.
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