Business, Legal & Accounting Glossary
A luxury tax is a tax on luxury goods. The luxury tax can be levied on any luxury item, with boats and cars being common targets. In the US, Congress established a luxury tax called the luxury auto excise tax in 1990. This luxury tax was levied on certain passenger vehicles priced above a certain threshold. That luxury tax was phased out in 2003. A luxury is a tax of a progressive nature, since only those with the means to afford the luxury item pay the luxury tax. If a luxury tax is not indexed to inflation it will eventually affect many more people than originally intended. For example, the New York State Additional Real Estate Transfer Tax, also known as the “Mansion Tax”, is a luxury tax paid by the buyer on transfer of any 1, to 3 family home or cooperative or condominium apartment priced above $1,000,000. In New York City, many two-bedroom apartments now cost this much. While a two-bedroom apartment may not be a mansion, thus luxury tax still applies.
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This glossary post was last updated: 10th February, 2020