Measure ULA forever changed the economics of high-value real estate sales in Los Angeles. As of July 1, 2026, the City of Los Angeles will impose a transfer tax of 4% on qualified transactions with a sales price of more than $5.4 million and a transfer tax of 5.5% on transactions with a sales price exceeding $10.9 million (in addition to the city transfer tax).
The larger issue for those with luxury properties is whether other jurisdictions in California will follow suit. Hire a professional (similar to a tax attorney in Palm Springs CA) who can help you.
Where could Mansion Taxes go?
There is no universal mansion tax in California. Rather, the individual cities may set up their own transfer-tax regimes. As of January 2025, 26 charter cities have their own transfer taxes, according to the state Legislative Analyst.
There are a number of markets that deserve to be discussed:
- Berkeley: Measure W, which goes into effect January 1, 2027, imposes higher transfer-tax rates for property with values above certain thresholds, ultimately rising to 3.5% for property valued at $3 million or more, and adjusted annually.
- Culver City: Already has graduated transfer-tax rates, up to 4% for transactions of $10 million or more.
- An ultra-high value residential property transfer tax has been under consideration in unincorporated Monterey County, which is an important market to keep an eye on.
- If anybody thinks that the luxury transaction tax is only for Southern California, think again: San Francisco has a progressive system in place already.
For sellers, that will mean they need to consider local rules before making the assumption that a home in other parts of Los Angeles will be somehow immune to a potential new “mansion tax.”
What are Sellers Saying?
The impact of transfer taxes can be a significant liquidity shock because the tax is typically based on the transaction value, not the seller’s profits. For instance, a home that sells for $15 million in Los Angeles may incur hundreds of thousands of dollars in transfer-tax liability. Having an expert (like a tax attorney in Pasadena CA) will provide you necessary information around taxation and more.
The tax may also be a factor in negotiations. Buyers should also be aware that the seller’s profit on the sale is reduced by the tax burden and try to negotiate the price accordingly.
Here are some strategies Sellers can consider:
Prior to listing a high-value property, sellers need to draw up a few different scenarios:
- Seller Financing
A person who sells the property could finance a portion of the price while the other is paid in cash. This can make cash flow more flexible, but transfer-tax rules may still apply to the underlying transfer, and it may be important to have a professional review of the transfer.
- Entity and Split-Transaction Planning
Some sales of LLCs, partnerships, or several interests may be subject to different tax implications. But creating a ‘splitting’ of a transaction only to avoid a threshold can be a significant legal and tax liability. Structure should be in relation to a legitimate business and transfer-tax structure.
- Put the tax allocation into place.5. Implement the Tax Allocation.
Local transfer taxes are usually borne by the seller, but can sometimes be negotiated in the purchase agreement that determines who economically pays certain costs associated with the transfer. If competing properties and/or market conditions indicate, the buyer may agree to pay a portion of the tax.
- Identify the Closing’s Process Steps
Thresholds and rates may vary. A tax estimate is not necessarily the applicable rules for the recording date; sellers must verify.
Here are Some Practical Suggestions for Luxury Sellers:
- Work out the transfer tax in advance when a person offers you something.
- Review and contrast the net after-tax cash flows of various deal structures.
- Check local rules for the specific house location.
- Work with a real estate lawyer and tax advisor from the start.
- Provide documented justification for restructuring of the entity for legitimate business reasons.
- Make sure to provide tax allocation terms explicitly in the purchase contract.
Measure ULA has proven to be a true eye-opener to the dynamics of the luxury market. In a discussion of transfer tax, other California jurisdictions are looking at increases, so sellers should not be considering transfer tax as an afterthought when negotiating a deal; rather, it should be a component of the deal.