Los Angeles residents pay California state income tax (up to 13.3%), a combined sales tax of 10.25%, and LA County property tax at approximately 1.1% of assessed value under Proposition 13. There is no separate LA personal income tax. Business owners pay the LA City Business Tax (LABT) based on receipts or industry classification. Since April 2023, LA's Measure ULA imposes a 'mansion tax' of 4% on property sales $5M–$10M and 5.5% above $10M. LA's overall tax burden is very high primarily because of California state income tax — the highest top rate of any US state.
At a glance
Key Facts
California Income Tax for LA Residents
All LA residents pay California income tax at the same rates as all California residents: progressive rates from 1% to 13.3%, with the 1% Mental Health Services Tax adding the top bracket for incomes above $1,000,000. At $100,000 taxable income (single filer): approximately $5,600 in CA tax (~5.6% effective). At $500,000: approximately $53,000 (~10.6% effective). At $1,000,000+: 13.3% marginal rate, approximately 11–12% effective rate. Federal rates on top: 22–37%. Combined federal + California for a $500,000 earner: approximately 48–50% marginal rate. California taxes worldwide income of its residents — LA residents with investment income, rental income, or business income from other states owe California tax on all of it.
LA City Business Tax (LABT)
Businesses operating in the City of Los Angeles pay the LA City Business Tax, assessed annually based on gross receipts. Rates vary by industry classification: Professions and occupations (lawyers, consultants, architects): $4.25 per $1,000 of gross receipts ($4,250 per $1M); Retail businesses: $1.01 per $1,000; Wholesale businesses: $1.01 per $1,000; Contractors: $4.25 per $1,000; Entertainment: $1.01–$4.25 per $1,000 depending on category. LABT is filed annually; new businesses may be exempt in the first year. Small businesses with gross receipts below $100,000 are exempt from LABT. LA does not impose a separate personal income tax on individuals.
Measure ULA — The Mansion Tax (Since April 2023)
Measure ULA (United to House LA), passed by LA voters in November 2022 and effective April 1, 2023, imposes a transfer tax on high-value property sales in the City of LA (not all LA County). Rates: 4% on sales of $5,000,000–$9,999,999; 5.5% on sales of $10,000,000 and above. The tax applies to all real property in the City of LA — residential, commercial, and industrial. Example: a $6M home sale generates $240,000 in Measure ULA tax (4%) plus the standard LA County documentary transfer tax of approximately $13,200 (0.22%). A $12M commercial building sale generates $660,000 in Measure ULA tax (5.5%). Unlike many transfer taxes, Measure ULA applies to the full sale price, not just the amount above the threshold.
LA County Property Tax
LA County follows California's Proposition 13: property is assessed at purchase price, with annual increases capped at 2% or the rate of inflation, whichever is lower. The LA County base property tax rate is 1% of assessed value, plus voter-approved bonds that vary by city and school district — effective rates across LA County typically range from 1.0% to 1.3% of assessed value. Example: a home assessed at $700,000 pays approximately $7,000–$9,100/year in property tax. Because Prop 13 ties assessment to purchase price, long-term LA homeowners often pay dramatically below what new buyers pay on the same property.
Los Angeles Sales Tax
The combined LA County unincorporated area sales tax is 10.25% (2026): California state base 6% + LA County Measure H 0.25% + Metro transportation 0.5% + various LA County measures totalling approximately 3.5%. The City of Los Angeles has a combined rate of 10.25%. Some LA County cities have higher rates: Culver City 10.25%, Santa Monica 10.25%, Compton 10.75%. LA County's 10.25% combined rate is significantly above the US national average of approximately 7.0%.
Remote Workers in LA: Key Tax Points
LA residents working remotely for out-of-state employers are still California tax residents — all wages are California-sourced and subject to CA income tax. The employer should withhold California income tax. If the employer fails to withhold CA tax, the employee owes it directly via quarterly estimated payments. LA has no 'Convenience of Employer' rule (that is New York's rule) — California taxes based on where work is physically performed. Remote workers physically in LA owe CA tax on all their wages. LA residents working partly from LA and partly from another state apportion income based on days worked in each state.
Introduction
Los Angeles is home to over 4 million residents and is one of the US's largest economic centres — in entertainment, technology, trade, and real estate. It is also one of the highest-taxed cities in the country, driven primarily by California's income tax structure. LA residents face the same 13.3% top state income tax rate as all California residents. The city-specific taxes — the LA City Business Tax and Measure ULA transfer tax — add further obligations for business owners and property sellers. This guide covers all the taxes affecting LA residents: state income tax, city business tax, property tax, sales tax, and the Measure ULA mansion tax that reshaped LA's luxury real estate market.
Section 01
Measure ULA: Impact on LA Real Estate Transactions
Measure ULA has significantly reshaped the economics of high-value LA real estate transactions since its April 2023 implementation. Understanding its scope and application is essential for anyone buying or selling property above $5M in the City of LA.
Geographic Scope: City of LA vs LA County
Measure ULA applies only within the City of Los Angeles boundaries — not to all of LA County. Cities within LA County that are NOT subject to Measure ULA include: Beverly Hills, Santa Monica, Culver City, Malibu, Burbank, Pasadena, Glendale, and many others. The distinction matters: selling a $7M home in Beverly Hills incurs no Measure ULA (though it incurs LA County documentary transfer tax of approximately $15,400). Selling a $7M home in the City of LA incurs $280,000 in Measure ULA tax. Buyers and sellers of high-value properties should verify whether the specific address falls within City of LA boundaries before signing.
Tax Planning Around Measure ULA
Some sellers of properties near the $5M threshold have structured sales to remain just below the threshold to avoid the 4% trigger. However, the IRS and California closely scrutinise artificially low sale prices. Arm's length transactions where parties negotiate a lower price below $5M are permissible — but artificial price reductions with side compensation arrangements are problematic. Sellers should document that the sale price reflects fair market value. Some commercial property sellers have explored transfer to a legal entity (rather than a direct sale) as a way to avoid Measure ULA — the City of LA has rules addressing certain entity transfers, so legal advice is required.
Measure ULA Revenue and Future
Measure ULA was projected to raise $600M–$1.1B annually for affordable housing and homelessness prevention. In practice, the tax has generated significantly less than projected, partly because high-value property transactions declined following its introduction. Legal challenges to the measure (including from apartment building owners) have been filed in state and federal court. As of April 2026, the measure remains in effect. Buyers and sellers should monitor any legal developments affecting its enforceability.
Section 02
Entertainment Industry Tax Considerations in LA
Los Angeles is the world's entertainment capital — and entertainment industry workers face specific tax considerations worth understanding.
Loan-Out Corporations for Entertainment Professionals
Many LA-based actors, directors, writers, and producers use a 'loan-out corporation' — a personal services corporation that contracts their services to studios and production companies. The individual is an employee of their own corporation; the corporation bills the studio. Tax benefit: income is split between salary (employment income) and retained corporate income; the corporation can deduct business expenses (agents, managers, publicists, home office) as corporate expenses. Post-TCJA, the C-corp rate is 21% flat — significantly below the 37% federal individual top rate for high earners. California taxes C-corps at 8.84%. The combined C-corp rate (federal + California) is approximately 29.84% — versus 50%+ for high-income individuals. Loan-out structures require careful legal setup, payroll compliance, and S-corp vs C-corp analysis.
Residuals, Royalties, and Deferred Compensation
Entertainment residuals (payments for reruns, streaming, foreign distribution) are ordinary income taxed at applicable federal and California rates in the year received. Royalties from music, books, or IP licensing are also ordinary income. California asserts source-income rights over residuals connected to California-based work — an actor who performed in California and later moves to another state may still owe California income tax on residuals from that California work, even after leaving the state.
LA residents face California's 13.3% top rate, Measure ULA transfer tax, and LA City Business Tax. TaxHub connects you with California tax specialists who understand LA-specific rules.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Does LA have a city income tax like New York City?
No. Los Angeles does not impose a personal income tax on individuals beyond California state income tax. This is a key difference from New York City, which adds up to 3.876% on top of New York State tax. LA residents pay California state income tax (up to 13.3%) but no additional LA city income tax on personal earnings. Business owners pay the LA City Business Tax on their business gross receipts — but this is a business tax, not a personal income tax. The absence of a city income tax makes LA more favourable than NYC for high-income individuals from a pure income tax standpoint — though California's state income tax is itself the highest in the US.
Q
Who pays Measure ULA and how is it calculated?
Measure ULA is paid by the seller (transferor) of property within the City of Los Angeles. It applies to all property types — residential, commercial, and industrial — with no exemptions for family transfers, trusts, or hardship. Calculation: 4% × the full sale price for sales $5M–$9,999,999; 5.5% × the full sale price for sales $10M+. The threshold is a cliff, not a bracket — if your property sells for $5,000,001, you pay 4% on the entire amount, not just the dollar above $5M. Sellers approaching the threshold should be aware of this cliff effect. Measure ULA is separate from and in addition to the LA County documentary transfer tax (approximately 0.11% for LA County, 0.22% for City of LA combined).
Q
I'm a freelancer in LA — do I need to register for the LA City Business Tax?
Yes, if you are conducting business within the City of Los Angeles, you are required to register with the LA Office of Finance and obtain a Business Tax Registration Certificate (BTRC), regardless of how much you earn. The registration must be done within 30 days of commencing business. Below $100,000 in gross receipts: you register but pay no tax (small business exemption). Above $100,000: you pay LABT at your industry rate (typically $4.25 per $1,000 for professional services = 0.425%). For most freelancers earning $150,000, the annual LABT is approximately $637. It is a modest tax compared to California income tax but the registration requirement is mandatory and penalties apply for non-compliance.
Q
How does California Proposition 13 affect property taxes for new LA homebuyers vs long-term owners?
Proposition 13 creates a significant disparity between new buyers and long-term owners. A homeowner who bought in LA in 1990 for $300,000 has their assessed value capped at approximately $600,000 today (after 36 years of 2% annual increases), paying approximately $6,600/year in property tax. A new buyer purchasing the same home at its current market value of $1,500,000 is assessed at $1,500,000 from day one, paying approximately $16,500/year. This creates a 'lock-in effect' — long-term owners face large property tax increases if they sell and buy a different property (unless they are 55+ and can transfer their base assessment under Proposition 19, effective February 2021).
Q
What is Proposition 19 and how does it affect LA property tax planning?
Proposition 19 (effective February 16, 2021) changed two key property tax rules in California. First, homeowners 55+ (or severely disabled, or wildfire/disaster victims) can transfer their current property's assessed value to a replacement home anywhere in California — up to 3 times. This allows older LA homeowners to 'downsize' or move without losing their Prop 13 base assessment. Second, Prop 19 significantly restricted parent-to-child transfers: inherited properties are now reassessed to market value unless the child uses the home as their primary residence AND the transfer involves less than $1,000,000 in property value. Most LA inherited properties above $1M will be fully reassessed under Prop 19, significantly increasing property taxes for heirs.
Q
What are the tax consequences of leaving Los Angeles for a no-income-tax state?
Leaving LA for Texas, Nevada, or Florida can save the California income tax portion (up to 13.3%) but requires genuinely establishing domicile in the new state. California's FTB pursues high-income departures aggressively, particularly when a large income event follows shortly after the claimed departure date. To establish non-California residency: obtain a driver's license in the new state; register your vehicle; register to vote; change your principal home to the new state (sell or lease out your California home); move your family; update your estate planning documents. California considers 546 days (18 months) of non-CA presence over two years as a strong safe harbour. Working remotely for a CA employer while living in another state creates nexus questions — consult a CA departure specialist.
Q
Are there any local LA tax incentives for businesses or property owners?
LA has several local incentive programmes worth knowing: (1) Enterprise Zones (now replaced by CA Competes Tax Credits): California's state-level tax credits for business expansion and job creation — LA businesses can apply to the CA Governor's Office of Business and Economic Development. (2) Opportunity Zones: LA has federally designated Opportunity Zones in areas including South LA, Watts, and parts of the San Fernando Valley — capital gains invested in Opportunity Zone funds receive federal tax deferral and potential elimination. (3) LA Business Tax new business exemption: first-year businesses operating in LA may qualify for a one-year LABT exemption. (4) Historic tax credits: the state and federal Historic Tax Credit for rehabilitation of historic buildings applies to many older LA properties.
Disclaimer:This guide provides general tax information for educational purposes only. Measure ULA is subject to ongoing litigation and may be modified or repealed. LA City Business Tax rates and exemption thresholds are subject to change by the LA City Council. California income tax rates are subject to annual adjustment. This is not tax advice. Consult a CPA familiar with California and Los Angeles tax rules for advice specific to your situation.