LA’s Mansion Tax Stays Intact as Committee Kills Reform, and July 1 Brings New Thresholds

The LA Measure ULA no reform July 2026 thresholds question has a short answer. The dollar cutoffs moved on their normal annual schedule and the rate structure did not change at all. For transactions closing after June 30 of 2026 the two thresholds are 5,400,000 dollars and 10,900,000 dollars. A conveyance above 5,400,000 dollars but below 10,900,000 dollars carries the Measure ULA tax at 4 percent. A conveyance at 10,900,000 dollars or more carries it at 5.5 percent. For closings through June 30 of 2026 the prior table used 5,300,000 dollars and 10,600,000 dollars at those same two rates.

Measure ULA does not stand alone. It stacks on the City of Los Angeles base documentary transfer tax of 2.25 dollars per 500 dollars of value, which works out to 0.45 percent. So the real combined rates are 4.45 percent in the lower band and 5.95 percent in the upper band. One drafting detail catches people out. The 500 dollar round-up convention applies to the base tax computation only. It does not apply to the Measure ULA percentage, which is figured on the consideration itself. That distinction is small in dollars and large in arguments, because escrow software sometimes rounds both lines the same way and the resulting figure will not tie to the City computation.

Worked example. A mixed-use building in Koreatown sells for 5,450,000 dollars with the deed recording in September of 2026. The Measure ULA tax at 4 percent is 218,000 dollars. The base transfer tax at 0.45 percent adds 24,525 dollars. Total transfer tax at closing is 242,525 dollars, which is 4.45 percent of the price. That is roughly the size of a normal broker commission again, paid on top of it. Move that same building to 10,900,000 dollars and the rate steps to 5.5 percent, producing 599,500 dollars of Measure ULA tax plus 49,050 dollars of base tax, or 648,550 dollars all in.

Now the part that decides real deals. These are cliff amounts, not brackets. The tax applies to the full consideration once the threshold is crossed rather than to the excess over it. A sale at 5,350,000 dollars closing in September of 2026 sits below the 5,400,000 dollar line and carries only the base tax of 24,075 dollars. The same 5,350,000 dollar price closing in June of 2026 would have been above the old 5,300,000 dollar line and would have carried 214,000 dollars of Measure ULA tax on top. A few weeks of calendar changed the answer by more than 200,000 dollars.

The common mistake is anchoring to the listing date or the contract date. The rule follows the closing, meaning the date the conveyance is recorded, so a deal negotiated in May that records in September uses the newer table. We have already seen one seller budget from a rate sheet printed in March. Thresholds are adjusted annually using the Bureau of Labor Statistics Chained Consumer Price Index, so the numbers will move again and any internal deal memo carrying a hard figure should carry a date next to it. A rate sheet without a date is a liability in a negotiation. Federal gain reporting for a sale of this kind runs through Form 4797 and Schedule D, with the underlying rules collected in Publication 544. Our tax strategy consulting group models the closing-date effect before a listing goes live, and our bookkeeping team keeps the basis records that decide what the sale actually costs. Owners with a property sitting near either line should treat the next annual adjustment as a planning date on the calendar.

The LA Measure ULA no reform July 2026 thresholds story ran through one committee hearing and one Council vote, and it ended with the rates untouched. Council File 26-0782 had proposed placing a measure on the November 2026 ballot that would have reduced the transfer tax rate. At the May 29 of 2026 hearing of the Ad Hoc Committee on Measure ULA, the committee declined to advance that ballot measure. In its place the committee issued report-back instructions on two different ideas.

The first idea is a pilot tax credit that would reduce the effective Measure ULA rate to 1.5 percent for qualifying new affordable multifamily construction. The second is a three-year homelessness transition pilot providing up to 30,000 dollars per household per year for as many as 1,000 households. Both were instructions to report back rather than enacted programs. Neither one is something a seller can claim today, and neither changes what escrow will collect at a closing this year. The full Council adopted the committee report as amended on July 1 of 2026 by a vote of 13 to 1 to 1, and the action was recorded as final on July 7 of 2026.

The practical result is the one sellers need. No Measure ULA amendment was placed on the November 2026 ballot. The rates and the thresholds stand unchanged, and the only figures that moved were the annual inflation adjustments described elsewhere on this page. An owner who postponed a listing in the spring on the theory that voters would cut the rate in November has waited for something that is not on the ballot.

Worked example of what that delay costs. An owner holding a small apartment building worth about 6,000,000 dollars decided in April of 2026 to wait for the November vote. Had the property sold instead, the transfer tax would have been 4.45 percent of the price, or 267,000 dollars, and the seller would have had the remaining proceeds working elsewhere for six months. There is no November relief coming, so the same 267,000 dollars is due whenever the sale happens, and the holding period simply grew by two quarters of carrying cost. Property taxes, insurance and debt service ran the entire time, and none of that spending bought a lower rate. Deferring a sale to chase a rate change that never materialized is the single most expensive error we have seen on this issue.

Two boundaries belong on this page. First, we are not commenting on the status of any litigation touching Measure ULA, because nothing about that was confirmed on an official source and a tax adviser guessing at a case posture is worse than useless. Second, The Reed Corporation is a certified public accounting and tax firm. We do not give legal advice on title, on deed language or on transfer documents, and those questions belong with the client’s own real estate counsel and the escrow officer handling the closing. What we do is compute the tax result, model the timing and reconcile it against the federal and California returns, which run through Form 8949 and Schedule D for capital transactions, with rental history reported on Schedule E and California treatment published by the Franchise Tax Board. Our tax strategy consulting team tracks the pilot programs as they develop, and our bookkeeping group holds the property records those computations depend on. Watch for the report-back items to surface again, because a credit aimed at new affordable construction could matter a great deal to a developer even though it changes nothing for an ordinary seller.

Not as a tax deduction, and that surprises almost every seller who asks. A local real property transfer tax is generally treated as an expense of sale rather than as a deductible tax. It reduces the amount realized on the disposition, which lowers the gain, instead of showing up as a separate write-off. The economic benefit is real but it arrives through the gain computation rather than through a deduction line, and the timing and character of that benefit are completely different. A deduction would offset ordinary income in the year paid. A reduction in amount realized offsets gain that may be taxed at a different rate in a different year, and it does nothing at all if the sale produces a loss.

Worked example. An investor sells a Los Angeles fourplex for 6,000,000 dollars with the deed recording in October of 2026. Measure ULA tax at 4 percent is 240,000 dollars and the base transfer tax at 0.45 percent is 27,000 dollars, so transfer taxes total 267,000 dollars. Broker commission runs 180,000 dollars and escrow and title charges add 22,000 dollars. Amount realized is 6,000,000 dollars less 469,000 dollars of selling costs, or 5,531,000 dollars. If adjusted basis after depreciation is 2,100,000 dollars, the gain is 3,431,000 dollars. Had the 267,000 dollars been ignored as a selling cost and left off the computation, the reported gain would have been overstated by that full amount.

Character matters as much as amount. Part of that gain is ordinary in substance because depreciation taken over the holding period comes back as unrecaptured section 1250 gain, and the rest is long-term capital gain. Federal reporting runs on Form 4797 and Schedule D. The rules governing amount realized and selling expenses are in Publication 544, and the basis rules that feed the other side of the subtraction are in Publication 551. Depreciation history should be reconciled against Form 4562 filings before a return is prepared. Missing years are common on a property that changed preparers, and the allowed or allowable rule means basis drops whether or not the deduction was ever actually claimed.

California adds weight to the result rather than relief from it. This is a high-tax state that taxes capital gains as ordinary income, so the state bill on a 3,431,000 dollar gain does not enjoy any preferential rate. California also imposes an 800 dollar minimum franchise tax on a limited liability company holding the property along with a gross receipts fee, and it does not conform to the federal qualified business income deduction. A seller comparing the total cost of exiting a Los Angeles asset to the cost of exiting one in a state without a personal income tax is looking at two different problems, and the transfer tax is only the first line of the difference.

The common mistake is a seller who puts the transfer tax on a rental schedule as a tax expense in the year of sale. That treatment overstates the current deduction, understates the gain and produces a return that does not tie to the closing statement. Pull the settlement statement into the file before anything is booked. Every line on it belongs somewhere, and the lines that do not fit a familiar category are usually the ones that matter most. Our bookkeeping team reconciles the closing statement line by line, and our individual tax return group carries the result onto the return. Sellers planning a 2027 disposition should assemble the improvement records now, because a basis file built during ownership beats one reconstructed after a closing every time.

It changes the cash, and cash is what makes an exchange work. A section 1031 like-kind exchange defers gain on real property held for investment or for productive use in a trade or business, but the deferral does nothing about money that leaves the deal at closing. The transfer tax leaves the deal. On a lower band sale the combined 4.45 percent walks out the door before the qualified intermediary ever holds a dollar, and it does so whether or not the exchange succeeds. A failed exchange returns the equity net of that cost, not gross of it.

Worked example. An investor sells a Los Angeles retail building for 6,000,000 dollars in the lower band. Transfer taxes total 267,000 dollars, commission is 180,000 dollars, other closing costs are 22,000 dollars, and a mortgage payoff takes 2,400,000 dollars. Net equity moving to the intermediary is 3,131,000 dollars. To defer the whole gain the investor generally needs to acquire replacement property of equal or greater value and put all of that equity back to work, replacing the debt with new debt or with fresh cash. Any equity pulled out along the way is boot and is taxable to the extent of gain. An investor who assumed the full 6,000,000 dollars of value would carry across has to arrange 2,869,000 dollars of new debt rather than the 2,400,000 dollars just paid off, because 469,000 dollars of value went to closing costs and never reached the exchange account.

Selling expenses do help the computation. Transfer taxes and ordinary transaction costs reduce the amount realized, which reduces the gain that could be recognized if boot appears. They do not create a deduction and they do not increase the deferral. The relevant federal mechanics live in Publication 544, basis carryover into the replacement property follows Publication 551, and any recognized gain lands on Form 8949 and Form 4797. Where the investor is above the applicable income threshold, recognized gain can also draw the Net Investment Income Tax computed on Form 8960, and passive loss carryforwards under the rules in Publication 925 may free up on a full disposition.

There is a second effect worth pricing. Because the thresholds are cliff amounts, a partial disposition strategy sometimes beats a single sale, and sometimes it does not once the extra closing costs and the loss of exchange simplicity are counted. Splitting one 11,000,000 dollar asset into two conveyances is a legal and title question long before it is a tax question, and we do not give legal advice on title or on transfer documents. That analysis belongs to the client’s real estate counsel, with our role limited to the tax modeling that sits alongside it. We will run the numbers on both structures and hand them to counsel rather than the other way around.

The common mistake is treating the exchange as a way to avoid the transfer tax. It is not. Measure ULA is imposed on the conveyance, so it is due at closing regardless of what happens to the proceeds afterward. Sellers who learn that late often discover it after the identification clock has already started. By then the structure is fixed and the only remaining choice is which replacement property to accept. Our tax strategy consulting group prices the exchange against an outright sale before a listing agreement is signed, and our bookkeeping team maintains the depreciation schedules the computation needs. Investors weighing a 2027 exchange should run both paths now, while there is still time to change the structure rather than react to it.

Anyone acting on the LA Measure ULA no reform July 2026 thresholds picture should start with the closing date rather than the listing date, because the recording date is what selects the table. After that, four planning levers matter. Pricing relative to the cliff. Timing relative to the annual adjustment. Entity structure. Holding period. None of those is exotic, and all four get skipped in practice. The first two decide the size of the tax bill and the last two decide how much of what remains the owner actually keeps.

Pricing first, because it dominates. Worked example. An owner holds a building the broker values at about 5,380,000 dollars. Closing after June 30 of 2026, that price sits below the 5,400,000 dollar threshold and carries only the base transfer tax of 24,210 dollars. Accepting a bid of 5,410,000 dollars instead crosses the line, and because the tax applies to the entire consideration rather than to the excess, the Measure ULA tax becomes 216,400 dollars. An extra 30,000 dollars of price costs 216,400 dollars of tax. Every seller within a few percent of either threshold needs that computation in front of them before a counteroffer goes out. In a market with thin bidding, holding a price just under a threshold is often worth more than winning a small bump above it.

Timing comes next. The thresholds adjust annually using the Bureau of Labor Statistics Chained Consumer Price Index, which means the cutoffs drift upward over time. A property that is marginally above the line today may sit below it after the next adjustment, and the reverse holds for a property whose value is rising faster than the index. That is a reason to date every internal valuation memo and to revisit it rather than to rely on a spreadsheet built last year. The index moves slowly, but a property sitting near a cliff amount needs only a small move to change bands.

Entity structure and holding period do the quieter work. Whether the asset sits in a limited liability company matters for California, where an entity pays the 800 dollar minimum franchise tax and a gross receipts fee, and where capital gains are taxed as ordinary income with no conformity to the federal qualified business income deduction. Holding period drives whether gain is long-term at the federal level and how much depreciation has accumulated. Rental results are reported on Schedule E, the property rules are in Publication 527, depreciation methods are in Publication 946, and a large sale usually requires a fresh estimated payment computed under Publication 505 using Form 1040-ES. California figures are published by the Franchise Tax Board.

The mistake that ends the year badly is forgetting the estimated payment. A seller who nets 3,100,000 dollars in October and spends the winter shopping for replacement property can arrive at April with a large balance and an underpayment computation attached. Fund the estimate at closing. Wiring the state and federal payments out of escrow costs nothing extra and removes the temptation to spend the money first. Two limits on our role should be plain. We do not give legal advice on title or on transfer documents, and we do not promise any particular outcome from a filing position. Owners who want the sale modeled end to end can request a consultation with our tax strategy group, and the basis and depreciation records behind it are kept by our bookkeeping team. Put the next threshold adjustment on the calendar now, because the numbers on this page carry a date and the date will turn over.