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What is the tax on a house over 5 million in California?

Published in California Real Estate Tax 2 mins read

While California does not impose a statewide "mansion tax" on properties sold over $5 million, specific cities within the state, most notably Los Angeles, have implemented their own local transfer taxes that apply to high-value real estate transactions.

Understanding the California Context

Many people inquire about a statewide "mansion tax" in California. It's important to clarify that California currently does not have a statewide tax specifically targeting luxury homes. Therefore, if you are purchasing a house over $5 million in most parts of California, you will not face an additional state-level tax solely due to its high value.

Los Angeles's Specific Property Transfer Tax

However, the situation changes significantly if the property is located within Los Angeles. Los Angeles has a distinct property transfer tax that applies to high-value transactions, often referred to colloquially as a "mansion tax" due to its focus on expensive properties. This tax is levied on the total sale price of the property.

Here's how the tax rates are structured in Los Angeles:

Property Sale Price Tax Rate Applied to Total Sale Price
Over $5 million up to $10 million 4%
Over $10 million 5.5%

This tax is typically paid at the time of sale, usually by the seller, but this can be negotiated between the buyer and seller in the transaction.

Practical Application and Examples

To illustrate how this local tax works in Los Angeles, consider the following examples:

  • For a $6 million home in Los Angeles:

    • The tax rate would be 4% of the total sale price.
    • Tax amount = 4% of $6,000,000 = $240,000
  • For a $12 million home in Los Angeles:

    • The tax rate would be 5.5% of the total sale price.
    • Tax amount = 5.5% of $12,000,000 = $660,000

This tax is a significant factor for individuals buying or selling high-value properties in Los Angeles, directly impacting the overall cost of the transaction. For properties outside of Los Angeles, this specific high-value transfer tax does not apply.