6 Legal Ways to Avoid LA Mansion Tax After Wildfire (2025 Guide)
If your post-fire Pacific Palisades sale could clear the $5.3M ULA line (4%; $10.6M = 5.5%), you have options: price just under threshold, pre-qualify nonprofit buyer exemptions, use creative financing to support a sub-threshold price, or explore subdivision if your parcel allows it. 1031 defers gains, not ULA. Always confirm with your CPA/attorney.
You're Not Behind—This Is About Choices
You've got insurance, debris, and family logistics on your plate. You don't need to decide anything today. My job is to lay out the math and the moves so when you're ready, we can run your numbers and avoid an unnecessary six-figure tax hit.
We're on your timeline.
First Principles (So We Don't Trip a Wire)
ULA thresholds (effective July 1, 2025):
4.0% on sales $5,300,000–$10,600,000 (LA Office of Finance)
5.5% on sales $10,600,000+ (LA Office of Finance)
These inflation-adjusted thresholds apply to the entire price once you cross the line. In LA practice, sellers typically pay ULA at closing (HomeLight).
Important clarifications:
No blanket fire-victim exemption exists as of October 4, 2025 (SM Mirror). A pause was floated in spring 2025, then walked back. Plan on today's rules.
Buyer-based exemptions exist for qualified affordable-housing nonprofits, CLTs, and government entities (LA Housing Department) but rarely fit luxury fire lots. When feasible, they must be pre-cleared with LA Housing Department.
1031 ≠ ULA relief. Exchanges can defer capital gains but do not erase ULA at closing (hcvt.com).
For comprehensive post-fire property guidance, see our Complete Pacific Palisades Fire Recovery Guide. (Add real link when publishing)
The 6 Strategies (With Math, Criteria, and Risks)
I'll break down each approach the way it actually works: what it is, how the numbers pencil, when it fits your situation, and where it can break. If anything feels complex, I can jump on a call with your CPA and attorney to keep this straightforward.
Strategy 1: Can You Price Below the $5.3M Threshold to Avoid ULA?
How it works: If defensible fair market value supports a price below $5.3M, list and negotiate under the line—ULA becomes $0.
The math (illustrative):
Close at $5.35M → 4% ULA = ~$214,000 (LA Office of Finance)
Close at $4.99M → $0 ULA (though base 0.45% city transfer tax still applies) (LA Office of Finance)
Works best when:
FMV range clusters $4.7M–$5.3M, supported by comps and appraisal
View corridor, utilities, and lot specifics justify sub-threshold pricing
You're not forcing a true $6M lot under $5.3M to save tax
✓ Key Takeaway: If your property's FMV genuinely falls between $4.7M-$5.3M, pricing below the threshold is the cleanest way to avoid ULA entirely—just ensure you have comps and an appraisal to defend your valuation.
Learn more about timing your sale for maximum value after fire damage. (Add real link)
Strategy 2: How Does Creative Financing Help Avoid ULA?
How it works: ULA is calculated on total consideration (AAGLA)—structuring payments over time doesn't erase ULA by itself. But installment terms or seller financing can create leverage to keep the headline price (the number on the deed) below $5.3M.
Two approaches:
Installment Sale:
If your buyer needs payment flexibility, you can trade terms for a $4.99M purchase price instead of $5.35M. This keeps ULA at $0 while spreading your proceeds over time.
Seller Carryback:
Offer attractive carry terms (example: 60% LTV, 6.25% interest-only, 24-month balloon) to justify a $4.95–$5.25M price. You're "selling the rate" instead of pushing the price over threshold.
Why it helps: Widens your buyer pool and anchors the headline price below $5.3M. ULA keys off the sale price, not your payment schedule (LA Office of Finance).
Watch out:
Document total consideration carefully—don't accidentally creep over threshold
Requires clean paperwork: promissory note, deed of trust, title/escrow coordination
Consider default risk and servicing requirements
Coordinate with your CPA on interest income reporting
✓ Key Takeaway: Creative financing doesn't eliminate ULA directly, but it creates negotiating leverage to defend a sub-threshold headline price—which is how you actually avoid the tax.
For detailed guidance on insurance proceeds and capital gains implications, see our companion article. (Add real link)
Strategy 3: Are There Nonprofit Buyer Exemptions I Can Use?
How it works: LA Housing Department administers exemptions for qualified buyers—government agencies, certain nonprofits, and community land trusts (LA Housing Department). If your buyer qualifies and the acquisition meets program rules, the transfer can be exempt from ULA.
Reality check: This path is rare for luxury land transactions. When it does fit—for example, infill assemblage near transit corridors or mission-driven development—you must pre-screen with LAHD before you list, or at least before you accept an offer.
Works best when:
Mission-aligned development (affordable housing, community benefit)
Specific geographic pockets where nonprofit interest exists
Buyer can document qualification before close
Watch out:
Eligibility requirements are strict (LA Housing Department)
Use restrictions may apply
Closing timelines can be longer
Keep a conventional exit strategy if exemption falls through
If you're exploring this path: I can coordinate a call with LAHD specialists and your CPA/attorney to validate feasibility before we list.
✓ Key Takeaway: Nonprofit exemptions are rare for luxury fire lots but worth exploring early if your buyer or parcel characteristics align with affordable housing or community benefit missions—just don't list your property banking on this path without LAHD pre-clearance.
Strategy 4: Can Subdividing My Property Avoid ULA?
How it works: If your parcel can be legally subdivided into multiple under-threshold conveyances (e.g., two sales each under $5.3M), you may close separate deals that each avoid ULA.
Example scenario:
Single 1.5-acre parcel: $8M value → $320K ULA (4% on full amount) (LA Office of Finance)
Subdivide into two 0.75-acre lots: $4.2M each → $0 ULA on both sales
When it fits:
Larger hillside or Highlands tracts
Existing tentative maps or straightforward lot-line adjustments
Zoning allows subdivision without extensive entitlements
Buyer market supports smaller lots
Watch out:
Entitlement risk and timeline (6-18 months typical)
Holding costs during subdivision process
Buyer pool may shrink with smaller lots
If resulting lot still exceeds $5.3M, ULA applies to that deed
Requires land-use attorney and surveyor/engineer
✓ Key Takeaway: Subdivision is a high-complexity strategy best suited for larger parcels where the math clearly supports splitting into multiple under-threshold lots—requires upfront legal review and 6-18 month timeline.
Strategy 5: Does a 1031 Exchange Eliminate ULA?
Clarity first: 1031 exchange is excellent for deferring capital gains when you reinvest into replacement property (hcvt.com)—but it does NOT eliminate ULA. Budget ULA as due at closing; use 1031 for your taxable gain strategy.
When it fits:
You plan to reinvest into replacement property within required timelines
You want to defer capital gains tax (federal/state)
You have a qualified intermediary lined up
You understand ULA is a separate closing cost
Watch out:
45-day identification deadline (hcvt.com)
180-day exchange completion deadline
Strict identification rules (3-property rule, 200% rule, or 95% rule)
Don't let ULA assumptions drive a bad 1031 strategy
✓ Key Takeaway: 1031 is a powerful tool for gains deferral, but it won't save you a penny on ULA—treat these as two separate tax strategies and budget for both at closing.
Strategy 6: How Does Market Timing Affect ULA Avoidance?
How it works: Use market data to support a defensible sub-threshold FMV. If your buyer pool is strongest during specific quarters (example: January-March for Palisades luxury land), we stage your listing to elicit $4.95–$5.25M outcomes versus drifting to $5.35M+.
Why it matters: ULA is binary—a $50K difference in price can swing a $200K+ tax bill (LA Office of Finance). We model three price bands against current comparable sales before listing.
Timing considerations:
Seasonal buyer activity patterns
Interest rate environment
Competitive inventory levels
Post-fire recovery sentiment and rebuild momentum
✓ Key Takeaway: Strategic timing doesn't avoid ULA by itself—it supports your pricing strategy by choosing market windows when buyer demand naturally supports sub-threshold valuations.
Quick Strategy Comparison
| Strategy | ULA Result | Complexity | Best For | Watch-Out |
|---|---|---|---|---|
| Price ≤ $5.3M | $0 ULA | Low | FMV supports sub-threshold | Don't underprice a $6M+ lot |
| Creative Financing | $0 if headline ≤ $5.3M | Medium | Leverage to hold price line | Total consideration limits |
| Nonprofit/CLT Buyer | Often exempt | Medium-High | Rare luxury scenarios | Confirm with LAHD early |
| Subdivision | Potential $0 per deed | High | Large parcels with map potential | Entitlement time/risk |
| 1031 Exchange | No ULA relief | Medium | Capital gains deferral | 45/180-day pressures |
| Strategic Timing | Supports sub-threshold | Low | Market-driven pricing | Requires current comp data |
Sources: LA Office of Finance, LA Housing Department, Law for Business
Decision Framework
Use this decision tree so you never have to gamble on future policy changes:
1. Do defensible offers land ≤ $5.3M?
✅ YES → Price/list ≤ $5.3M, document FMV (appraisal + comps)
❌ NO → Continue to #2
2. Is a realistic nonprofit/CLT buyer feasible?
✅ YES → Pre-screen with LA Housing Department for exemption before listing
❌ NO → Continue to #3
3. Treat ULA as due; consider creative financing to defend sub-threshold price OR explore subdivision if parcel supports it
For 1031: Use for gains deferral, not ULA avoidance
For timing: Apply to all strategies—data drives pricing
Frequently Asked Questions
Can I use a 1031 exchange to avoid paying ULA?
No. 1031 can defer capital gains, but ULA is a local transfer tax due at closing under current rules (hcvt.com). Plan for both separately.
Do I have to pay ULA as the seller, or does the buyer pay it?
Sellers customarily pay ULA in Los Angeles, though parties can negotiate in the purchase agreement (HomeLight). For luxury properties, don't count on shifting this cost.
Is there a ULA exemption for wildfire sellers?
As of October 4, 2025, no blanket seller exemption exists (SM Mirror). Buyer-side exemptions for qualified nonprofits/CLTs may apply in limited cases—must be confirmed with LA Housing Department.
What's the mansion tax threshold in Los Angeles for 2025?
For closings on or after July 1, 2025: 4% on $5.3M–$10.6M and 5.5% on $10.6M+ (LA Office of Finance). Thresholds adjust annually for inflation.
Can seller financing help me avoid ULA?
Indirectly. ULA is calculated on the headline purchase price (AAGLA). Seller-carry terms can support a sub-threshold price, which is how you avoid ULA—not by structuring payments alone.
Will the City pause ULA for fire victims later?
A pause was considered in March 2025 but not enacted (SM Mirror). Don't build your sale strategy on possible future policy changes—structure under current law.
Next Steps (Your Timeline, Not Mine)
Getting your bearings (3–6 months out):
I can run a comparative analysis showing net outcomes at different price points ($4.95M, $5.05M, $5.35M) so you see exactly how ULA impacts your bottom line at each level. No pressure—just clarity when you need it.
Deciding now (this month):
Let's pull current Palisades fire-lot comps, confirm your FMV range, and map out which strategy fits your situation. If nonprofit exemption makes sense, I'll coordinate a pre-screening call with LAHD and your advisors. If subdivision is worth exploring, I can bring in a land-use attorney to assess feasibility.
20-minute call to review your specific options—no obligation.
Ready to talk? Call or text me at 323.684.4421 or email justin@theborgesrealestateteam.com
Legal & Tax Disclaimers
Legal/Tax: I'm not a CPA or attorney. These strategies reflect current public guidance and my transaction experience. Your specific situation requires personalized advice from your CPA and real estate attorney. Nothing here constitutes legal or tax advice.
Market Data: Thresholds and policies change. Figures reflect what's published as of October 4, 2025. Obtain an updated valuation and legal review before making decisions.
Sources: All claims sourced from Los Angeles Office of Finance, LA Housing Department, law firms, and industry publications cited throughout.
Author Bio
Justin Borges leads the Borges Real Estate Team and advises clients on complex real estate transactions across Los Angeles, including fire recovery sales and tax structuring scenarios. When specialized expertise is needed—whether Palisades-specific market knowledge or legal tax strategy—he connects clients with the right professionals to ensure the best outcome. Justin regularly coordinates with CPAs, tax attorneys, and land-use counsel to help clients navigate complex transactions.
Contact: 323.684.4421 | justin@theborgesrealestateteam.com | lametrohomefinder.com
Sources: hcvt.com, AAGLA, LA Office of Finance
