As much of the United States struggles with housing affordability, some states and local governments believe one solution is an extra tax on those who buy and sell expensive homes. A “mansion tax” is an additional one-time real estate transfer tax imposed on high-price property sales.
The term “mansion tax” is a bit of a misnomer. The higher tax rate is based on the property’s selling price, not its square footage or luxury features. If the selling price is above a specified amount, the extra tax applies, whether it’s a studio apartment or an estate that rivals Buckingham Palace.
Mansion taxes have been popping up on ballots throughout the U.S. In 2024, Chicago voters rejected an extra tax on real estate sales above $1 million to fund services for unhoused people. However, voters in areas such as Los Angeles have approved similar measures.
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Many state or local governments impose a transfer tax when a property is bought or sold. The transfer tax is typically part of closing costs. A mansion tax is an extra transfer tax on sales that exceed a certain amount, with revenue going toward infrastructure and addressing issues like housing affordability.
According to the National Association of Realtors (NAR), cities and counties in seven states plus the District of Columbia have so-called mansion taxes.
So, does the buyer or seller pay the mansion tax? It depends on state and local law. Like other closing costs, the matter of who pays transfer taxes, including mansion taxes, is usually negotiable.
Many mansion taxes are graduated, which means the tax rate increases as the sale price increases. When levied at gradually increasing rates, mansion taxes look similar to federal income tax brackets, which tax higher income levels at similar rates. Most states that assess an income tax also use a progressive system.
Learn more: What is a real estate transfer tax, and who pays for it?
Supporters of mansion taxes say levying an additional tax on high-price home sales helps address socioeconomic inequities through state and local taxation. According to ITEP, the bottom 20% of earners pay a larger share of their incomes in property and sales taxes than the highest 20%. To improve communities, mansion tax revenues help fund health programs, public schools, affordable housing, and assistance efforts for the unhoused, depending on the locale.
Those who favor mansion taxes also say communities of color were historically excluded from housing due to the now-illegal practice of redlining and that assessing an additional tax on high-price homes is a step toward addressing a legacy of housing discrimination.
But opponents contend that the extra tax stifles development, forcing developers to consider areas that don’t assess a mansion tax. They argue that mansion taxes could inadvertently make housing even more expensive and lead to higher property taxes across the board.
Critics also point to the many ways buyers and sellers have found to skirt mansion taxes. After mansion taxes took effect in Los Angeles on homes selling for $5 million or more, many sellers listed their homes for just under $5 million to avoid the tax. Others used tactics like dividing single properties into two lots and selling them separately.
Read more: How the mortgage interest tax deduction works
Here’s a look at how mansion taxes work in several jurisdictions throughout the U.S. This is not an exhaustive list, but it should give you a good idea of how mansion taxes work in major areas.
Connecticut charges a 2.25% tax rate to the portion of any sale that exceeds $2.5 million. For example, if you sold a home for $3.5 million, you’d pay a lower tax rate on the first $2.5 million of the sale, but pay the highest tax rate of 2.25% on the remaining $1 million.
Hawaii’s mansion tax is somewhat complicated, so while anyone potentially facing a mansion tax should consult a tax or real estate professional — Hawaii homeowners definitely should. There are seven sales price brackets. In each bracket, Hawaii residents pay a lower tax rate on sales than non-residents. Usually, a seller is responsible for mansion taxes. Those selling a primary residence for less than $600,000 would pay a transfer tax of 0.1%, while those selling a non-primary residence would pay 0.15%. Rates gradually increase until they hit the maximum of 1% on a $10 million sale for primary residences or 1.25% for non-primary residences.
The Los Angeles mansion tax took effect April 1, 2023, after voters approved Measure ULA, aimed at tackling housing affordability and providing help for people at risk of homelessness. The extra tax applies to both residential and commercial properties. Sellers pay an additional 4% tax for properties that fetch between $5 million and $10 million, and an additional 5.5% tax if the property sells for over $10 million.
Given the devastating destruction from LA-area wildfires in early 2025, opponents to the mansion tax are looking for relief for affected homeowners. New proposals, if approved, would exempt owners rebuilding high-dollar homes from the mansion tax. Those developing on or buying fire-destroyed land would also be exempt from these taxes for five years post-purchase.
Sellers in New Jersey are in charge of paying the standard transfer tax, but if there’s also a mansion tax, buyers are the ones who pay the additional fee. Buyers typically pay an additional 1% tax if they purchase a home for $1 million or more. The tax applies to residential properties, as well as most commercial properties.
The state of New York charges residential real estate buyers an extra tax on sales of $1 million. The surcharge starts at 1% if you buy a home for $1 million to $2 million but gets progressively higher, capping out at 3.9% if you purchase a property for $25 million or more.
Learn more: First-time home buyer programs in New York
The state of Washington uses graduated tax rates on home sales. The tax on sales of $525,000 or less is 1.1%, while properties that sell for above $3.025 million are taxed at 3%. The seller is typically responsible for the tax.
Read more: What to know about a first-time home buyer tax credit in 2025
Mansion taxes can come into play even if you’re buying or selling a relatively small home – especially if homes in the area have rapidly appreciated in price. Be sure to consider all closing costs, including transfer taxes and applicable mansion taxes, if you’re thinking of buying or selling a home.
In deciding whether to sell or buy a house, it’s also essential to weigh the overall costs of ownership. A mansion tax is a one-time expense, but you’ll pay property taxes annually. Consider the bigger tax picture as you weigh the pros and cons of buying or selling a home.
Dig deeper: How much house can I afford? Use Yahoo’s home affordability calculator.
As of early 2025, seven states plus the District of Columbia have a mansion tax. Current states include California, Connecticut, Hawaii, Illinois (Evanston only), Maryland, New Jersey, and New York.
There isn’t a statewide mansion tax in California, but several cities have a mansion tax. For instance, Los Angeles imposes a mansion tax of 4% on properties selling for $5 million or more and 5.5% on properties selling for over $10 million. San Jose has a mansion tax of 0.75% to 1.5% on properties sold for at least $2 million. Other California cities with mansion taxes include Oakland, San Mateo, Berkeley, Santa Monica, and Emeryville.
The New Jersey mansion tax is 1% of the purchase price of homes sold for $1 million or more. For instance, the mansion tax on a home costing $2 million would be $20,000. In New Jersey, buyers pay the mansion tax.
This article was edited by Laura Grace Tarpley.
