Nevada vs. California Tax Savings

calculator and paper

Lake Tahoe real estate has experienced a dramatic increase from part-time use to full time use of resort properties. Over the last three years, the ability to work remotely and the pursuit of a healthier lifestyle led many Bay Area residences to relocate into what was previously their vacation residence.

When choosing a property in Lake Tahoe, you will find a mix of California and Nevada residences. Nevada has many tax savings benefits that should be considered when purchasing a home at Lake Tahoe.

State Income Tax

California has a top marginal income tax rate of 12.3%. It also has a surcharge of 1% for individuals with an income of over $1 million.

Because Nevada doesn’t have a state income tax, owning a home in Incline Village or Zephyr Cove, Nevada can provide enormous tax savings when filing.

Retirement Accounts & Pensions

Another tax consideration for retirees is the fact that California taxes all income from pensions and retirement accounts. This is taxed at the same level as personal income tax.  

Retirement income is not taxed in Nevada, while California taxes all private, state, local and federal pensions. If you are considering purchasing a home at Lake Tahoe for retirement purposes, this is a huge tax savings.

Gasoline Taxes

When purchasing gasoline in California vs Nevada, consumers will pay an additional $0.53 cents per gallon, which amounts to $1 dollar or more per gallon.

In comparison, Nevada applies this excise tax at only $0.23 per gallon. Additionally, California has raised this gasoline tax more than $0.17 over the last three years.

The average price per gallon in Reno, where many Lake Tahoe residence shop, is currently at $5.08 per gallon. Gas prices in California are currently at $5.62. Since most American use 565 gallons per year, this is a savings of over $325 per year.

California vs Nevada Property Tax

Both California and Nevada have property tax rates lower than the national average of 1.08%. The average property tax rate in California is 0.79%, compared to 0.69% in Nevada.

Considering that the median sale price of homes around the Lake Tahoe basin are over $1 million, this property tax savings can make a difference of thousands of dollars over many years.

Capital Gains Tax

When investing in stocks and real estate, all investors will have to pay the federal tax on capital gains. In California, the state income tax can range between 1% and 13.3%, which means that there is an additional tax on this income. Again, since Nevada does not have a state income tax, investors will save on their earnings.

The IRS does offer a provision for real estate capital gain tax savings that requires ownership for a minimum of 2 years. However, for real estate investors, this wouldn’t apply since it is based only on the primary residence.

Overall, it is easy to see why many owners of multiple resort properties choose to make Incline Village, Nevada their primary residence.

When comparing sales tax in Washoe vs Placer County, the rates are similar. However, the fact that Nevada has no state income tax can result in a huge amount of savings, especially in retirement.

Contact me today for information about the outstanding legacy, lakefront properties available around the shores of beautiful Lake Tahoe.

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