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Owning Property in California vs. Nevada

What are the advantages and disadvantages to owning property in California vs. Nevada? People looking to own property at Lake Tahoe often ask this question in trying to decide which side of the lake to purchase property. The following information shows some of the comparisons between owning/living in each state. 

  • Property taxes in NV are county specific.
  • Washoe County assesses property taxes every 5 years, but currently they are several years behind in that process
  • Washoe County taxes are higher than Douglas County. Douglas County real estate is a lot less expensive thank Washoe County; Washoe County is closer to CA.
  • There is no personal income tax in the state of Nevada. This can be a good thing, especially for retirees from CA who can bring their retirement incomes with them if they become residents. It’s the main difference. It’s like getting a 10% raise for living across the state line. Residency is 183 days a year. Some Californian/Nevadans fudge on this and maintain homes in both states but claim NV as primary residency and vote/register vehicles/bank etc. in NV.
  • Generally, I tell people that if they buy a $1,000,000 house in CA, their tax bill will be about $1000/month, while in Douglas County the property tax on a $1,000,000 house is +/- $3500 per year.  Assuming an 8% annual increase, it will take 9 years for the DC tax to equal the CA tax, and property taxes are usually just one of several considerations in the equation.  The most important thing, of course, is for the client to decide what the most important factors in his personal equation are.
  • In California, property tax is reassessed upon transfer at approximately 1.25% of sales price.  In Nevada, property taxes are not uniform throughout the state but vary county by county, and are not reassessed upon transfer but on a 5 year schedule.  In Douglas County, including the Carson Valley and Tahoe’s East Shore, taxes tend to be significantly lower than in Washoe County, which includes Incline Village and Reno.   In recent years the Washoe County rates have become very controversial as they’ve approached those of California.
  • Douglas County property tax bills cannot be calculated from the “Total Assessed Value” posted on the Assessor’s website.   Among the subjective considerations are view, age of the property and Special Taxes.  Sewer is the biggest component of Special Taxes – that’s generally where a property is hooked up directly to county sewer rather than being part of a Gen’l Improvement Dist.   Those Special Taxes are billed as part of the prop tax bill.  GID members pay for water, sewer and snow removal separately at roughly $135/month.  The newer the improvements the higher the property tax bill.  View is also a subjective element –  in the case of two seemingly identical homes, the one with the better view usually has higher taxes.
  • Several years ago the NV legislature capped annual increases at 3% for primary residence.  I called the Douglas County Treasurer and confirmed that the increase for second homes and rentals (non owner occupied properties) can be up to 8% in the county.
  • Assume you have a sale for $1,000,000 in Nevada and California.  Nevada taxes will stay the same through the end of the fiscal year.  Typically taxes on Incline Village properties run .6 of 1% of the value of the home.  Taxes on a $1,000,000 is approximately $6,000.  The yearly cap on taxes is 3%.  Taxes on the sale of a $1,000,000 in CA is $12,500.  It will take over 30 years for property taxes to reach $12,500 plus all the savings you have over the 30 years.  I believe your taxes go up a minimal amount each year.
  • As a resident, we have no state income tax if you earn your money in Nevada or if you have passive income even if it comes from California.  If you are a resident of Nevada and are employed in California you will be taxed by California.
  • My experience has shown me that if it is Primary than the tax advantages can be more substantial.  If it is a second home and they already live in California than not as big a deal UNLESS they plan to retire in that home to protect their assets than Nevada is a better option.

Estimate Property Tax

California: 1.25% of purchase price

 Nevada: Taxable value x 35% = assessed value x tax rate = property taxes due

State Sales Tax

California: 8.25% (food and prescription drugs exempt.  Tax varies according to locality. Can be as high as 10.5%)

Nevada: 6.85% until 2011 (food and prescription drugs exempt). Counties may add up to .875% additional.

Gasoline Tax

California: 46.6 cents/gallon

Nevada: 33.1 cents/gallon

Diesel Fuel Tax

California: 46.6 cents/gallon

Nevada: 28.6 cents/gallon

Cigarette Tax

California: 37 cents/pack of 20 plus an additional surcharge of 50 cents per pack, bringing the total to 87 cents

Nevada: .80 cents/pack of 20

Personal Income Taxes

California: Low 1.25%; High 10.55%. For 2010 CA has enacted a 0.25% point increase in each of state’s income tax brackets. Tax credit for dependents was reduced from $309 to $98. 

    Income Brackets: ** Lowest $7,168; Highest $1 mil.
    Number of Brackets: 6
    Tax Credits: Single – $99; Married – $198; Dependents – $309; age 65 or older – $99
    Standard Deduction: Single – $3,637; Married filing jointly – $7,274

Nevada: No state income tax

Retirement Income

California: Social Security and Railroad Retirement benefits are exempt.  There is a 2.5% tax on early distributions and qualified pensions.  All private, local, state and federal pensions are fully taxed.

Nevada: Not taxed

Inheritance and Estate Taxes

California: There is no inheritance tax.  However, there is a limited California estate tax related to federal estate tax collection.

Nevada: There is no inheritance tax and a limited estate tax related to federal estate tax collection.

Real Property Example

Taxable Value $ 1,000,000 x 1.25%
Property Tax due $12,500

Taxable Value $ 1,000,000 x 35%
Assessed Value 350,000 x $ .0298
Property Tax due $10,043.00