Santa Fe’s “Mansion Tax”: How It Works and Who It Affects

What GAAR REALTORS® Should Know About Santa Fe’s New High-End Excise Tax

In the November 2023 election, voters in Santa Fe approved a ballot measure to establish a new excise tax on high-end residential real estate transactions.

Specifically:
  • The tax is 3% on the portion of the sale price of a residential property in Santa Fe that exceeds $1 million. 
  • The tax is collected from the purchaser at the time of transfer/closing. 
  • The purpose is to fund the city’s Affordable Housing Trust Fund (AHTF) to advance affordable and workforce housing initiatives. 
Implementation
  • The city published rule-making materials in March 2024 to implement the ordinance, inviting public comment on administrative rules for the tax. 
  • Initially, a lower court (First Judicial District Court) ruled against the tax, finding the city lacked legal authority to impose it. 
  • However, as of October 28, 2025, the New Mexico Court of Appeals upheld the tax—ruling that the tax ordinance is lawful, overturning the lower-court decision.
  • Because of that ruling, the tax is now moving forward (subject to final administrative rule-making) and is no longer in limbo.
What This Means for REALTORS®

For sellers / buyers of luxury homes in Santa Fe (over the $1 M threshold):

  • Buyers will need to factor in this added cost: ~3% of the portion over $1 M. For example, on a $1.2 M sale the tax would be $6,000 (3% of the $200,000 over $1 M). 
  • If the tax is now upheld, sellers and listing agents must clearly communicate the tax to potential buyers so they are not surprised at closing.
  • Listings priced just over $1 M may see buyer hesitation or negotiation adjustments, given this added cost—so timing and pricing strategy matter.
For REALTORS® advising clients:
  • If you have clients looking at Santa Fe who are near or above the $1 M mark, advise them on the tax implication and timing (pre- vs. post-tax implementation)
  • Monitor the legal challenge: depending on outcome, the tax may be delayed, invalidated, or upheld—affecting market dynamics
  • Consider how this might influence comparative pricing, buyer incentives, or closing timing in the Santa Fe luxury segment
  • Highlight to clients the fundraising purpose (affordable/workforce housing) which may resonate with socially-conscious buyers
Broader Market & Strategic Implications
  • The Santa Fe tax reflects a broader national trend of “mansion taxes” or high-end transfer taxes in regions facing housing affordability pressure. 
  • For Santa Fe: the tax was proposed in response to rising home prices and a widening affordability gap—the whitepaper cited that from 2016 to 2022, home prices doubled while wages grew only modestly. 
  • For GAAR members: even though Santa Fe is outside your immediate market, the tax could create competitive dynamics in the broader New Mexico luxury market. For example, a buyer might choose Albuquerque over Santa Fe just to avoid an added 3% cost—or may ask for credits.
  • Sellers and listing agents in Santa Fe might accelerate closings ahead of or close to effective date changes (though now the tax is upheld) which could temporarily increase pre-tax activity—a factor to watch.
Action Items for GAAR REALTORS®
  1. Monitor Effective Date & Rules – While the tax is upheld, ensure you track when the tax will officially be collected and what administrative rules require (due forms, closing disclosures, who pays).
  2. Revise Buyer & Seller Disclosures – If you have clients looking at Santa Fe, update your closing-cost sheets, buyer advisories, and listing flyers to include the tax where appropriate.
  3. Client Advisory Messaging – For clients comparing markets: emphasize the incremental cost of Santa Fe’s tax in your market-comparison conversations; for Santa Fe listings, discuss negotiation implications of the tax.
  4. Team / Office Briefing – Consider scheduling a “Lunch & Learn” or briefing for your agents/affiliates on the tax mechanics, 2025 legal status, and tactics for luxury-market listings/sales in Santa Fe.
  5. Watch Market Shift Signals – Monitor inventory, average sales price, time-on-market, and buyer behavior in Santa Fe luxury segment for signs of impact from the tax (e.g., more listings just under $1 M, slower absorption above $1 M).

Summary

The new high-end excise tax in Santa Fe—3% on the portion of a residential sale over $1 M—is now legally upheld as of October 2025, which clears a major barrier to its implementation. For GAAR REALTORS®, while the tax lies outside your core Albuquerque-region market, its existence introduces new cost factors into luxury transactions in northern New Mexico, impacts buyer/seller decisions, and warrants strategic awareness. By staying informed, updating your materials, and proactively advising clients, you’ll continue to deliver high-value, data-driven counsel in the luxury real-estate space.