Tahoe Donner vs. Incline Village: California vs. Nevada

July 8th, 2016

The Greater Tahoe Region is the most popular destination for active individuals in the Blossom Wealth Management community. Consequently, we are often asked whether purchasing a second home is a wise decision. Like most financial decisions, it depends. Before considering the whimsical elements like ski resorts and lake access, let’s take a moment to touch on a couple of life’s certainties: death and taxes.

This article will highlight the two areas that are inquired about most often at Blossom: Tahoe Donner, near Truckee, and Incline Village, just across the border in Nevada.

What are the Estate Tax Planning Benefits of Living in Nevada Compared to California?

Estate planning does more than preserve wealth for an individual’s heirs; it offers multiple advantages for people of means during their lifetime too. Besides enabling a smooth transition of assets to their beneficiaries, strategic planning helps men and women of substance examine and implement their best options to handle their debt and taxes.
In the United States as of this writing, 43 states tax income, most tax retirement income to varying degrees, while 15 impose an estate tax. Nevada has no estate tax and does not tax retirement or any other form of income, personal or corporate. Remember: Tax evasion is illegal. Tax avoidance is common sense. For those looking to keep more of what they’ve earned, investing in homes where states don’t burden residents with avoidable taxes, makes for a lucrative investment option. It’s no surprise that with a ten-year growth rate of nearly 20 percent, Nevada’s population grew at a faster rate than almost every other state in the nation.

Living in California or Nevada: Why Move to a Nearly Tax-Free Location?

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Tax professionals can shed light on why people living in California can benefit a great deal financially from moving their official residences to a location that’s merely a few hours away. For those looking to save money, making a shift should not be a concern. After just 183 days of using Nevada as a principal place of residence, an individual is not liable to pay income tax (depending on specific factors) no matter where he or she stays for the rest of the year. This requirement makes it easy for individuals to own homes in both California and Nevada.

Nevada property tax rates vary by county. On the other hand, in California, a $1,000,000 house will be taxed at about $1000/month, since property tax is reassessed upon transfer at approximately 1.25% of sales price.

Why Nevada?

Although Nevada does not tax people on the income earned in state, taxpayers are not exempt from the taxes payable on sources of income from outside of the state. If they earn income from California, they must pay California taxes. However, individuals who earn a return from intangible assets like income from retirement benefits, IRAs, gains earned from publicly held or loosely held securities, interest income and dividends, all stand to gain from taking up residency in the state of Nevada.

Officially living in Nevada and conducting business there allows individuals to avoid personal and corporate income tax, inventory, franchise, and gross receipts tax. Moreover, there is no tax on issuances of corporate shares or their sale or transfer.

Is Nevada Business Friendly?

In a word, yes.

The business-friendly environment of Nevada offers protection to company directors and their officers. Residents are not required to share their succession, inheritance plans, or other information with the IRS. In fact, Kiplinger Magazine rates Nevada one of the top ten most tax friendly states for retirees. Men or women of substance could prosper financially from either buying a second home or moving to the state of Nevada instead of living in highly taxed California. Nevada’s attractions range from the bucolic beauty of Lake Tahoe, to the nightlife mecca Las Vegas whose metro population will soon top 2 million.

Why California?

Now that we have highlighted the estate planning, income tax and business friendly advantages of living in Nevada one might ask why we haven’t moved Blossom to Incline Village.

On the personal side, we love living in the bay area. Proximity to Tahoe, Carmel, Marin, Diablo, Tilden, Napa and the coast provide myriad day trip opportunities. Similarly, vibrant communities comprised of active and open minded families with diverse backgrounds create a rich experience for ourselves and our children.

On the professional side, California is in a golden age of creativity and growth. Some of the most interesting people from around the world aspire to live and work in the bay area. There is an ecosystem of entrepreneurship that can nurture an esoteric idea and propel its growth until it becomes a flourishing enterprise. We witness the fruits of these labors on a daily basis and help families save most of the proceeds for required future needs and redeploy the balance back into other investments. It can be argued that there is no better place for curious wealth managers than California.

Incline Village Private Pool and Beach for Incline Village Portion of Article (1)

Tahoe Donner Private Beach Club at Donner Lake for Tahoe Donner Section

Tahoe Donner, CA vs. Incline Village, NV:

Contrasting the tax status of California with the tax advantages of Nevada helps make it easier to decide between living in locations like Tahoe Donner or Incline Village. Individuals have various other reasons for taking up homes in these gorgeous retreats. Let’s compare them:

Incline Village Private Beach for Incline Village Portion of Article

  • Beaches – Tahoe Donner in Truckee, CA is in close proximity to beautiful beaches. It’s a retreat for residents who take pride in the available amenities and the architecturally designed real estate, most of which was built in the past decade. The residents enjoy access to a quaint private beach and boat landing conveniently located on the east shore of Donner Lake. Other public beaches are nearby and provide plentiful access to everything from well-maintained hiking trails to sand bar islands.Incline Village, on the other hand, is home to stunning mountain havens and astonishing private beaches. If you are going to be a part time resident, you will need to pay all year for private beach access.
  • Commute Time – Tahoe Donner is closer to San Francisco by car (about 3 hours away). Incline Village is just a little further (about 3.5 hours away).
  • Lake Access – Tahoe Donner provides access to Donner Lake but one would need to drive approximately 15 miles to North Lake Tahoe.
  • Property Taxes – Property taxes in Tahoe Donner are approximately 1.25% of the purchase price whereas in Washoe Country for Incline Village, property taxes vary by location but are mostly around .60%. Trout Creek Recreation Center for Tahoe Donner Section of ArticleAlthough property is supposed to be assessed every five years, currently there’s a backlog of several years. Which state individuals reside in determines the taxes. The levies also vary if taxpayers plan to move to Nevada after retirement and have no tangible income source. California’s Proposition 13 does allow for the underlying property value to be increased by a maximum of 2% each year and the property tax is capped at 1%. Incline Village property taxes are calculated by taking the current year tax rate and multiplying it by the assessed value. If that amount is greater than a 3% to 8% increase over the prior year’s taxes, an abatement may be applied to limit the increase.
  • Amenities/Recreation – When it comes to the amenities fee, Tahoe Donner will cost $1,900 a year while in Incline Village it comes to $800 a year. Tahoe Donner boasts a vast list of amenities both public and private. Public amenities include – A Cross Country Ski and Snowshoe area, Downhill Ski Area, Snowplay (sledding & tubbing), Tahoe Donner Golf course, Equestrian Center, Volleyball, Children Play Structures, Archery and the famous Truckee BMX Bike Park. Private amenities include – Trout Creek Recreation Center (pools, playground & fitness), Tennis Center and Beach Club Marina (Donner Lake board ramp and private beach). Incline Village also provides a variety of amenities for IVGID Pass holders (local residents). You have access to Ski Beach, Incline Beach and Burnt Ceder, the Incline Fitness Trail, Wetlands Hunting (Minden, Nevada), and multiple Golf Courses.Tahoe Donner Downhill Ski Area for Tahoe Donner section of article
  • Skiing – Both Incline Village and Tahoe Donner have excellent access to skiing. Incline Village is located only 2.3 miles from the family friendly Diamond Peak Ski Resort, 10.7 miles from Mount Rose Ski Tahoe and 17.3 miles from Northstar Ski Resort whereas Tahoe Donner offers easy access to a variety of ski resorts: Boreal is 10.1 miles away, Donner Ski Ranch is 10.8 miles away, Sugarbowl resort is 11.7 miles away, Northstar is 7.4 miles away, Squaw Valley Resort is 11.7 miles away and Tahoe Donner Downhill Ski Area is located in the community! Tahoe Donner Cross Country ski area was recently voted one of the top three cross country ski areas in North America by USA Today and has over 100 kilometers of trails. You also have access to the Royal Gorge area for over 200 kilometers of Cross Country Skiing, Snowshoeing and Snow Kiting.
  • Traffic – Of course, summer and winter traffic can be a problem and should be considered before deciding to settle in either state. The Lake Tahoe area gets more traffic compared to the Tahoe Donner area.
  • Purchase Price – Tahoe Donner tends to be a bit cheaper than Incline Village for more recent construction. Incline Village had a building boom in the late 1970’s and leans towards older construction.
  • Rental Market – This can be a mix. Downtown Truckee Image for Tahoe Donner Portion of ArticleTahoe Donner offers a greater potential for long term ski leases and access to summer activities for families. Incline Village offers private beaches but a recreation/punch card needs to be obtained from a permanent resident. The beaches are maintained by Incline Village General Improvement District (IVGID) fees and taxes; they are not for public use. However, guests of the Hyatt can access the beach if they purchase day passes ($12/person). Not all local renters have beach access. Another popular solution for non-residents is visiting Sand Harbor. That is, unless it is a particularly busy summer day. In this scenario one must go to Sand Harbor very early or risk being locked out of the full parking lot.
  • Airports – Tahoe Donner has access to two local airports. Truckee Tahoe Airport is located 2.5 miles from downtown Truckee. Reno-Tahoe International Airport is located 35 miles away. Sacramento International Airport is just over 100 miles from Truckee. Incline Village is 33 miles from Reno-Tahoe International Airport and 16.3 miles from Truckee Tahoe airport.

Ultimately the decision on where to buy a house is very personal. The value that one family places on a particular activity could vary widely compared to the importance that their neighbor would rate the same activity.

Whereas we have discussed things like estate taxes and income taxes one has to ask if these are philosophical issues or real practical considerations. For instance, how much money would you need to make in order to justify moving your family across a state border to take advantage of a different tax regime? What if moving to that location creates a burdensome time barrier between your new residence and your favorite activity? Relatives? Work?

 

Which do you value more: time or money?

Will that change in the future?

Blossom Wealth Management prides itself on being fair and objective when it comes to real estate. We want our community to live in places where they feel inspired to interact with their neighbors and surroundings. Both Incline Village and Tahoe Donner are storybook beautiful and present endless opportunities to enjoy nature.

A decision on which is better is a matter of family preferences and priorities.

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