On today’s episode of THE FINANCIAL COMMUTE, host Chris Galeski invites Wealth Planner and Estate Attorney Brian Standing to discuss the Measure ULA tax that went into effect for the City of Los Angeles on April 1, 2023. This new law has increased tax from 1% to 4% on the sale of any real estate in the City of LA that is at least $5 million in gross value. If the property sells for over $10 million, the tax will increase to 5.5%. This includes any type of property (residencies, commercial, etc.). This heightened tax does NOT apply to gifting, inheritance, spousal transfers, or transfers into business entities.  

The intent of this increased tax is to raise money for affordable housing and rent assistance. However, Chris and Brian agree this tax law may potentially increase rent; by discouraging development in the City of Los Angeles, fewer new residences will be available to meet rental demand, leading to an increase in rental prices. Furthermore, if buyers of rental real estate bear part of the increased costs (as sellers may require), those costs may ultimately pass through to the tenants as increased rent.

Brian recommends listeners to wait and see how Measure ULA plays out before trying to execute tax-saving strategies. Some people have been considering selling their property in increments, but Brian says strategies like this may not work since Los Angeles may still recognize it as one whole property. 

Disclosures:

Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and do not represent the views and opinions held by Morton Wealth. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.