What is a Luxury Tax?
Some luxury goods, or items that are not considered essential, are accompanied by a luxury tax. Luxury tax is often modeled after sales tax, a tax which is applied to the sales or rental of specific properties or services, or value added tax (VAT), a tax which is applied to exchanges in which the value of an item or service has increased. Luxury tax is often applied to very expensive cars and jewelry. In cases of expensive real estate transactions for private homes and properties, luxury tax might also be applied. Because luxury tax only applies to items that can be purchased by the wealthy, it only applies to the wealthy. There is rarely a public outcry regarding luxury taxes because they only apply to a narrow margin of individuals. If you plan on purchasing a Bentley or a precious stone the size of a baby’s fist, then you should prepare yourself not only for the cost of your purchase, but also for the cost of the luxury tax that you are likely to pay out. Sometimes luxury taxes may
