Los Angeles sellers face more layers than almost anywhere else in the country: federal capital gains, the Net Investment Income Tax, California's own top marginal rate, standard transfer tax, and — above certain price points — the city's Measure ULA. Here's what actually stacks up on a typical LA sale, and one way to soften it.
A Los Angeles property sale can face up to five layers before you see a dollar of proceeds: federal long-term capital gains (0%, 15%, or 20% depending on your bracket), the 3.8% Net Investment Income Tax above certain income thresholds, California's state tax (which taxes capital gains as ordinary income, up to 13.3% at the top bracket), the standard county documentary transfer tax of $1.10 per $1,000 of sale price (plus any city add-on), and, for higher-value City of Los Angeles sales, Measure ULA.
Measure ULA, the city's "mansion tax," applies to property sales within Los Angeles city limits above certain thresholds — roughly $5.3 million for a 4% tax, and roughly $10.6 million for a 5.5% tax (thresholds adjust annually for inflation — confirm the current-year figures before you sell). This is a transfer tax on the gross sale price, not on your gain, so it applies whether the property has appreciated a little or a lot. On a $6,000,000 LA home sale, that's roughly $240,000 just for Measure ULA, on top of every layer above it. It's paid by the seller, and it's real — sellers near those thresholds sometimes structure pricing or timing conversations with this squarely in mind, which is worth discussing with your broker and CPA.
Say a longtime rental property owner in the San Fernando Valley bought a fourplex decades ago for $1,200,000 and sells today for $3,000,000 — an $1,800,000 gain. Recognized all at once: roughly 20% federal LTCG ($360,000), 3.8% NIIT (~$68,400), and California tax at close to the top marginal rate on the balance (potentially $200,000+), before county transfer tax and closing costs. Depending on income mix and depreciation recapture, the combined federal-plus-state hit on that gain can realistically run 35-40% when everything stacks in one year.
Many LA sellers default to a 1031 exchange to defer this stack, but it comes with its own pressure: a strict 45-day identification window and 180-day close window, in a market where good replacement properties can be scarce and overpriced, plus you're required to keep buying real estate to keep deferring — you never actually get to convert the gain into spendable income. See why the 1031 timeline traps so many LA sellers, or compare it directly to a structured sale.
A Structured Installment Sale lets an LA seller take the same $1,800,000 gain and recognize it over a chosen number of years instead of all at once — say $180,000 a year over 10 years — keeping much more of it inside the 0%/15% federal brackets instead of hitting the 20% bracket, the 3.8% NIIT, and California's top rate simultaneously in one tax year. It doesn't touch Measure ULA or county transfer tax, which are due at closing regardless of how the gain itself is taxed, but it directly addresses the income-tax stack, which is usually the larger number. See the full California tax stack or run your specific numbers.
This has to be papered before escrow opens, not after — it's a decision made at the letter-of-intent stage, not something you can layer on after the purchase agreement is signed.
It applies to sales within Los Angeles city limits above roughly $5.3 million (4% rate) and roughly $10.6 million (5.5% rate); thresholds index for inflation annually, so confirm the current figures before closing. Property outside city limits — unincorporated LA County or other cities — isn't subject to it.
On the gross sale price, not your gain — so it applies even to properties with modest appreciation, as long as the sale price crosses the threshold.
No. Measure ULA and standard transfer taxes are due at closing regardless of how you structure the income-tax portion of your gain. A SIS addresses the federal and state capital gains layers, not the transfer-tax layer.
Depending on income, depreciation recapture, and bracket, combined federal and California tax on a large gain recognized in one year commonly lands in the 35-40% range before any city transfer tax. This is illustrative, not a guarantee — every return is different.
Only if you use a 1031 exchange. A Structured Installment Sale defers by spreading recognition over time with no requirement to buy replacement property.
Plug in your sale price, basis, and state — the calculator runs your exact 2026 federal + California tax and shows what a Structured Installment Sale keeps in your pocket.
See your number → Full calculator
Or talk it through: 213-340-2018 · Hans Goldstein · NPN 20602398. Educational only — not tax, legal, or accounting advice.
