A new tax is to be imposed on the very wealthy in Los Angeles. Voters approved the tax in November as a way to raise public funds to prevent and help with the current homelessness crisis. Starting April 1st, property sales between $5M and $10M will be taxed 4% and sales over $10M will be taxed at 5.5%.
This has fired up the owners of these properties to get them sold prior April 1st. So much so that some owners are offering to give co-operating agents a $1M, $2M bonuses, others have offered to throw in a brand new luxury car if they purchase before the deadline.
While the Real Estate agents are fighting this new law in court, a local realtor believes this will have a cooling effect on transactions as buyers and sellers are waiting to see what the result of the lawsuit would be.
Agents have already began to work around the tax when marketing properties. Properties that would normally be listing over $5M are now listing just under the tax cut-off, other deals include conditions that the Sellers have termination rights if the property doesn’t close before the deadline.
Many Realtors believe that a $5M house may no longer qualify as a mansion, and this tax will have the most impact on that price point, the “lower-end” mansions price points. They say true luxury doesn’t start until the $10M price point and the tax on a $40M dollar sale is much less to a buyer in that price point versus a buyer at a $5M dollar sale.
All in all, this tax is expected to help generate enough revenue to help with over $25,000 affordable housing units in the next decade and to provide emergency rental assistance, income support and legal assistance.
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To read more about this new tax: https://www.theguardian.com/us-news/2023/mar/31/los-angeles-mansion-tax-realtors-sell-off-frenzy#:~:text=The%20new%20tax%2C%20designed%20to,on%20sales%20over%20%2410m.