A mansion can inspire different visions among real-estate agents, home buyers, and housing hopefuls Dreamscrolling through online listings. A pool, open acreage, or a plethora of bedrooms could be among the must-haves. In certain U.S. cities, however, “mansion” takes on a whole new meaning — and it’s determined by price rather than size.

A mansion tax is a one-time transfer tax that applies to high-end property sales at closing when the price reaches certain amounts. Across the country, seven states — Connecticut, Hawaii, New Jersey, New York, Rhode Island, Vermont, Washington state — and Washington, D.C., have a form of this tax in place.¹

A West Coast rollout

Added tax can be specific to cities or metro areas, too. Los Angeles’ mansion tax, known as Measure ULA, went into effect in April 2023, with the goal of raising $900 million each year to fund a variety of housing initiatives.² In L.A., sellers of both residential and commercial properties sold at or above $5 million are required to pay a 4% tax, and if a property is sold for more than $10 million, sellers pay 5.5%.³

Here’s how the tax has played out in Los Angeles in less than two years:⁴

• A rush to close: Many L.A. buyers flocked to the high-end market before the law was in place, with 344 transactions above $5 million in March 2023
• The market adjusted: Despite a large decline in high-priced sales the month the law went into effect (dropping to only 13), by November 2023, monthly sales over $5 million had nearly tripled, driving $14 million in funds
• A property mix: Projections predict that 38% of Measure ULA’s overall funding will come from sales of single-family homes, though multifamily and commercial properties should bring in around 25% each

An East Coast standby

On the other side of the country, a mansion tax has been a mainstay in New York state since 1989.⁵ Buyers pay a 1% tax on any home purchase of $1 million or higher.

New York City added another layer to the tax equation in 2019, when it added an additional mansion tax for buyers of homes at $2 million or higher. The tax increases with a home’s sale price, topping out at 3.9% for homes of $25 million and up.⁶

Across the state, New York homes had a median sale price of $535,900 as of December 2024.⁷ The numbers jump when entering the more expensive parts of the state:

• During the same period, Manhattan’s median sale price was more than double, at $1,150,000.⁸
• In Brooklyn, the median sale price in December came in at $999,000.⁹

Fitting into the market

Not all buyers and sellers will meet the threshold to pay mansion tax, but those who are close could tip the scales more quickly: Home prices saw a 37% surge across the U.S. from January 2021 through October 2024.¹⁰

As competition for limited housing inventory runs high in some U.S. metro areas and with mortgage rates rising, the question of financing can also come into play. From January 2024 through August 2024, 33% of home buyers paid entirely in cash.¹¹

Homeownership can be a money milestone: The majority of Americans (52%) believe that owning a home makes a person financially successful, according to Empower research.

With the variety of properties and prices across the U.S., a qualifying “mansion” could take the form of a one-bedroom apartment or sprawling estate — which is another reason to keep taxes in mind when considering a new dream home.