Understanding the Los Angeles Transfer Tax: A Quick Guide
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
Understanding real estate transfer taxes is important when selling your home in Los Angeles. Transfer taxes are fees imposed by local or state governments when property changes hands. These taxes can vary widely depending on location and can significantly impact the total cost of your transaction.
Our concise guide will explore how transfer taxes function in Los Angeles, outlining the various types and what sellers should anticipate paying. Whether you’re just curious or actively planning to list your property, knowing these details will help you navigate the financial aspects of your home sale more effectively.
Connect with a Top Agent to Help Maximize Value
Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
Disclaimer: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Los Angeles area tax services or attorneys should not be considered endorsements.
What are transfer taxes?
Real estate transfer taxes are imposed by state or local governments when the ownership of a property is transferred from one person to another. As defined by the Federal Trade Commission, these taxes are due when the title to a property—essentially the document that confirms your legal ownership—is officially passed to a new owner. This process can be triggered by sales, inheritance, or even gifting of property.
The amount you pay in transfer taxes can vary greatly depending on the location of the property. This is because different states, counties, and cities can set their own rates and rules for these taxes. Transfer taxes are primarily a way for local and state governments to generate revenue, supporting various public services and infrastructure projects. Understanding these costs is essential for anyone involved in a real estate transaction.
Who pays for transfer taxes?
In Los Angeles, the responsibility for paying transfer taxes can differ based on the terms negotiated during the sale of a property. Typically, the seller pays transfer taxes in California, though this is not required. In Los Angeles, it falls to either party, provided it is paid.
Before completing the transaction, sellers can work with their buyers to determine who is ultimately responsible for the city’s transfer tax — or if they want to share the responsibility.
However, this can vary heavily based on your location in the Golden State.
What are the types of transfer taxes?
Transfer taxes will typically vary based on local guidelines but can generally be broken down into three categories — state, city, and county, depending on the state. Here’s a quick look at how it works in Los Angeles.
State transfer taxes
For Los Angeles property transfers, a documentary transfer tax of $0.55 per every $500 of home value is assessed. However, there may be other taxes to consider depending on where you are located in the Los Angeles area.
County transfer taxes
In Los Angeles County, there are five additional special tax rates, depending on if you are located in Culver City, Los Angeles, Pomona, Redondo Beach, or Santa Beach, and depending on if your property changed hands prior to March or April in 2023.
For property that changed hands in Los Angeles after April 1, 2023, a rate of 0.45% on sales above $100 but not exceeding $5,000,000; or 4.45% on sales above $5,000,000 but below $10,000,000; or 5.95% on sales $10,000,000 and above is assessed.
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Are transfer taxes deductible?
Unfortunately, transfer taxes cannot be deducted directly from your income taxes. However, there is a strategy that can mitigate the financial impact on your taxes, particularly concerning capital gains. Capital gains refer to the profit you earn from selling your property, which, like other assets, is taxable by federal standards.
According to the IRS, sellers can choose to treat transfer taxes as selling costs. This approach allows them to subtract these costs from the total sale price of their home at closing. By reducing the reported sale price, you effectively lower the capital gains realized, thereby decreasing the amount of capital gains tax owed on the profit from the sale. This method can offer a significant financial advantage when it comes to tax time.
Transfer tax exemptions
Some sellers may be eligible for transfer tax exemptions depending on the nature of the transaction and local rules. Here are some examples where Los Angeles sellers might be exempt from paying transfer taxes:
- Title confirmation in grantee’s name
- Conveyances during marriage dissolution
- Securing or satisfying a debt
- Transferring interests into or out of a living trust
- Alterations in title-holding methods
- Court-ordered conveyances not related to sales
- Conveyances as gifts or due to the death of the title holder
- Establishing or confirming separate or community property due to marriage considerations
- Name change confirmations
- Easement or oil and gas lease transfers for nominal values under $100
- Conveyances where existing liens match or exceed property value
- Finalizing a property transfer under a land contract
- Transactions between the same parties maintaining proportionate interests
Estimating transfer taxes for your home sale
To accurately estimate the potential proceeds from selling your Los Angeles home, consider using HomeLight’s Net Proceeds Calculator. This tool factors in essential costs such as closing expenses, transfer taxes, agent fees, and any updates you’ve made to the property, providing a clear estimate of what you might earn from the sale.
Additionally, working with a top real estate agent can provide valuable insights into your specific situation. Transfer taxes and other closing costs can sometimes be negotiated, depending on market conditions.
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At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
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