Los Angeles Tax Guide 2026: California Income Tax, LA Business Tax & Property Tax

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.

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.

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.