One of my Chase International colleagues and fellow blogger, Linda Granger, just posted a nice piece on the relative advantages/disadvantages to purchasing property in California vs. Nevada. Linda works out of our Tahoe City office and covers both the CA and NV sides of the lake, so this is a topic she frequently addresses with clients in her market.
Linda’s post on the subject is informative, and contains a list of her sources. Check it out here: California or Nevada?
Rubiconer
At first, I was expecting a wide-ranging diccussion of many variables between Nevada vs. Calif. But all Ms. Granger really talks about is taxes. I don’t think the issue of operating a home business is really all that relevant to the issue of Nevada vs. Calif. for most people.
With all due respect to Ms. Granger, if all we are talking about is taxes, that is a no-brainer. Nevada wins hands down. Property taxes are much cheaper cheaper in Nevada. Nevada has no state income tax if the primary residence is a possible issue.
I am not saying that taxes ought to be the primary consideration in any purchase. Not at all. I for one much prefer the “old Tahoe” ambience of the West Shore to Incline Village.
But if all we are talking about is taxes, Nevada wins on every count.
Fourth Tee
I agree that if ALL we are talking about is the tax burden once one buys a house at Tahoe, Nevada wins.
But as Ms. Granger does point out, the purchase prices are significantly higher in Nevada, at least if we are talking about Incline Village, Crystal Bay, and Glenbrook.
Perhaps the opportunity to get into the market and to buy a house for several hundred thousand dollars less in California makes up for the increased tax burden that comes with owning in California. That is a legitimate topic of discussion.
Hof Brau
“Perhaps the opportunity to … buy a house for several hundred thousand doallars less in California makes up for the increased tax burden that comes with owning in California.”
I agree, particularly if the California house is going to be a second home and there is no issue about becoming a California resident. Paying four thousand dollars a year more in property taxes will never amount to the four hundred thousand dollar difference in purchase price.
If we are talking about the primary residence, and thus becoming subject to Calif. income tax, that may a closer question. But it may not be that close if one’s income is not large. Again, even if one has to pay a few thousand dolars to the State of Calif. in income taxes, it could take decades to offset the difference in purchase price.
For big earners, it is not all that close. Thus the presence of so many “primary” residences located on the Nevada side that are occupied two months a year.
geopower
Reno’s on the right side of this list:
http://www.ewg.org/chromium6-in-tap-water/findings
Apparently we have no detectable hexavalent chromium in our water- the chemical that Erin Brockovich famously took PG&E to court for contaminating a California town’s groundwater with. And apparently that’s notable because most places tested had levels over the new proposed California limits.
Tahoma Tom
I too prefer the tranquility of the West Shore. But I plan to retire in Nevada to save the 10% or more California will be asking for soon. A better question I’d like to see put is where is the best place to live in Nevada? For the initiation price, IV seems too steep to me. I thought it was Reno but it has taken such a hit in the last 2-3 years I’m no longer certain it will bounce back in any time frame that works for my retirement.
skeptical
TT,
Take a look at some of the properties in Galena Forest. It’s 20min down the hill from Mt. Rose. Plenty of Tahoe style homes in the midst of a pine forest on 1 acre lots. Much cheaper than IV. If you don’t need to see Tahoe every day, or don’t mind driving 20min to get there, you can feel like you’re in Tahoe at more Reno like prices. It’s about 20-25min to conveniences like the Reno airport, downtown, etc…
FWIW
Sully
TT, if you’re retiring what type of bounce are you expecting? Do you plan on speculating in real estate during retirement? If not, then Reno area probably has already hit bottom as it’s on the wrong end of just about every list published and really can’t get much worse. Real estate prices are fair in most price bands under 350K and getting there in the higher end market. In the meantime, it’s still a small town with big city attractions. Traffic is much less stressful than most of California areas, air is fresher.
Rubiconer
Tahoma Tom,
The median price of houses in Tahoma is substantially above the median price in Reno. If you have owned a house in Tahoma for any length of time, you are probably going to have more than enough to buy in Reno and have some left over.
However, if you are waiting for Reno prices to return to where they were 3 years ago, I hope you are a very young retiree with a lONG time to wait.
MikeZ
I thought it (place to buy a home and retire) was Reno but it has taken such a hit in the last 2-3 years I’m no longer certain it will bounce back in any time frame that works for my retirement.
Just curious … for a retirement home, unless your retirement plans include living off the appreciation, why does home value appreciation – I assume that’s what you refer to as “bounce back” – after purchase matter?
Sully
Update on worst lists. Reno/Sparks has tied for 17th worse in finding jobs this winter. That is actually an improvement, in that we are not in the top (bottom) ten. 🙂
Tahoma Tom
MikeZ – By bounce back I meant the overall health of the people and the economy. I have a hard time living in a depressed area for various reasons.
Last (or first) on the retirement lists says a lot. But I am going to check out Galena Forest, as I’ve never been there. Thanks for the input.
geopower
Skeptical,
FWIW,
Galena forest is on top of a whole bunch of small but active faults. Look for yourself:
http://www.nbmg.unr.edu/dox/urban/4Bi.pdf
Sully
TT, for what its worth, I think the low ranking came about because of Las Vegas. If you wanted to move to LV, I would say the same thing the article mentions. However, I don’t agree with this area as being that bad.
Tom
In my opinion, Galena Forest is a wooded community of rustic-type mountain cabin looking houses, with very little spacing between them. It has a helter-skelter look to it, which makes it look like Wrightwood or Idyllwild, in southern California. If you are looking in Galena, I would like to suggest also looking next door at St. James Village, which has a more open and less cluttered feel to it.
As to retirement locations, I think Reno/Tahoe has more positives than negatives, but that is my own personal decision. The various retirement places rated sites have sorting functions based into them, and many of those have very little to do with the preferences of some people. Their programming reflects the dogma of the people who created them as to what they think should be important factors, not what may be more important to a particular individual.
As to climate, several friends a few years ahead of us in retirement planning, have their main H.Q. house at the Lake, and then leave in early November and spend the colder months in the desert and return to the main home in May. Some watch the residence limitation for tax purposes, and rent in Palm Springs. Another family has a small house in Clark County. All agree that of any options available, its hard to beat Lake Tahoe in June through September.
Norton
Tom, one would not have to “watch the residence limitation for tax purposes” if one’s house was in Nevada. Correct? Just call the Nevada house the primary residence and you are good.
If the house is on the California side of Tahoe, how does spending the winters in Palm Springs solve the residence problem? Did they move Palm Springs to Nevada?
Tom
Norton asked whether you could “Just call the Nevada house the primary residence and you are good.”
Nope, not if you subsequently spend too much time in your old home state of California, trying to avoid the harsh Reno-Tahoe winter climate.
I wish it were so simple to disavow one’s historical California residency for tax purposes by a move to Nevada, but it isn’t. Just calling the new house at the Lake, which would of course need to be on the Nevada side of Tahoe, your primary residence, won’t make it. If you spend 183 days or more in some other second home which happens to be in Palm Springs, or in a temporary rental residence in California, you haven’t “moved” to Nevada, for tax situs purposes, under California law. The Franchise Tax Board doesn’t want to let go of us that easily. They have prevailed in court on this viewpoint, so it is necessary after moving to Nevada, for California income tax purposes, to not inadvertently lose your new claim to status as a Nevada resident and expatriate of California, by spending too much time in California after the move. For this reason, one client splits the winters in rentals between Scottsdale and Palm Springs. If part of a retirement choice of Nevada is going to be tax-motivated, check with your tax advisor on subsequent living for part of the year in California, before you make the move.
Sully
Tom, although Tahoe may have a harsh winter climate – Reno isn’t that bad. I have two down jackets hanging in my closet that I haven’t worn in the three years I’ve been here. The dry climate versus very wet bay area climate makes 40 degrees here similar to 50 -55 degrees on the coast. Not sure how LA area winter climate reflects this, but I am quite comfortable here regarding weather. However, if primary is in Tahoe, well that may be a different story. Shoveling snow isn’t that bad, if only a few times a season – but not every day!
Also, I know the FTB will keep track of you if you are drawing income from CA sources, but how do they track you for renting property? GPS ! 🙂
Tom
Sully, one of the things they track is when you cease to file a California resident return after having done so for many years, and they are then flagged to find out why. They won’t mind if you are deceased, but if you have moved out of state, you will have the burden of proving that you truly have done so under applicable tax law definition of primary residence. If you ignore an FTB inquiry letter forwarded to you or if you check the wrong boxes in replying, you will invite an audit notice based upon an alleged missing return. A person’s CPA or tax preparer should be involved in responding to any such form inquiry letter.
Sully
Oh yeah, I’ve been through that part and not just at state level but city also, but that was based on income not property. After the first year of jumping through hoops, they finally gave up! I still can’t figure how they can track you by renting a place in Palm Springs if you are not deriving income from a CA source.
Tom
Sully, they don’t track you through your new rental location, they wouldn’t even know about that yet. They are flagged by the cessation of filing of your California Resident returns. Then they send out their first inquiry to your last address of record (on your last return before your returns stopped), with a copy to your return preparer’s address on the last return which they have. If no answer is received, they have search resources to then use to find you and send you that inquiry. How hard they look probably depends upon how significant your annual tax check was in recent prior years. If you are still a Californian, by their standards, then they can still seek their share of all of your taxable income, not just your California source income. If you have moved to Nevada, they lose out on all but maybe the California source income, as to which they may expect you to file a Non-resident California income tax return reporting that California source income. If you have no Calif. source income, and have effectively moved to Nevada, plus retained insufficient ties to California to allow the FTB to claim you are still a resident, than you should be home free. It can be jumping through hoops and can take time, as you commented. There are some accountants in Incline Village who do a lot of taxpayer rep in this practice area…they had a commentary blog on what was the Galena Reno site about two or three years ago, I don’t remember their firm name though, and that site seems no longer maintained.
smarten
FWIW TT, I suggest you visit Galena Forest in the middle of summer. No the hills aren’t baren like Reno proper, but the weather can be just as swealtering. This was a big turnoff for us when we were checking out Reno as a possible new home. And since St. James is next store to Galena Forest, ditto the observation. Furthermore half of St. James isn’t in the forest like Galena.
Yes you have to be more “hearty” to live in the Tahoe Basin. We’ve just been through two massive winter storms and I can honestly say that for us, it was no big deal! Make sure your home is south facing [it warms your house naturally and melts the snow]; make sure your driveway is short and level; make sure you own a good snowblower; and, make sure you own a good four wheel drive vehicle with studded snow tires.
Now Galena gets a good amount of snow in the winter. And unlike the Tahoe Basin, you’ll be hard pressed to find a truly south facing home that isn’t blocked out by Mt. Rose and/or some pretty large trees. So it can get dark, cold and the roads get icy.
Good luck in your search.