NEW TAX LAW ALERT
Measure ULA and Measure GS will have substantial financial impacts on sellers’ profits in Los Angeles and Santa Monica after March 1st & April 1st, 2023.
These new laws include significant tax increases for homes sold in Los Angeles and Santa Monica at/or above $5 million, $8 million, and $10 million.
If you are thinking of selling a property in these areas, it would be important to understand how these upcoming taxes could impact the proceeds. Closing escrow prior to March 1st or April 1st, 2023 would be critical dates to consider.
City of Santa Monica, which will take effect on March 1st, 2023 states that properties sold at $8 million or above will be taxed 5.6%.
City of Los Angeles, which will take effect on April 1st, 2023 states that properties sold at $5 million or above will incur an additional 4% tax, and properties sold at $10 million or above will be taxed an additional 5.5%. On a $5 million sale, the transfer tax will increase from $28,000 to $228,000 due at the close of the sale and deducted by escrow regardless if the seller is taking a loss on the property or not. This is for both residential and commercial real estate within the city of LA. This HHS Tax (Homelessness and Housing Solutions Tax) is in addition to the Los Angeles City and County documentary transfer taxes that are already imposed on transfers of real property at a combined rate of $5.60 per $1,000 of value (or fraction thereof). It will be imposed on “each deed, instrument or writing granted, assigned or otherwise conveyed to, or vested in…”. The language is not limited to the amount in excess of $5MM or $10MM but is on the “consideration or value” so starting from zero!