The bottom line
Planning Your Legacy
When we say that Clear Creek is borderline perfect, we’re referring to considerable advantages of enjoying a residence on the eastern side of the state line that bisects Lake Tahoe. Those who envision a liquidity event, work from a home office, or travel extensively may find a Nevada address a prudent choice.
Tahoe is a unique destination, a lake literally bisected by the state line. The California side features nearly the highest income tax rate in the country – especially now with new restrictions on deducting state and property taxes. The Nevada side, with its pristine eastern shore, is a natural wonderland with the equally wondrous advantages of a Nevada residency – no state income tax, no business tax and no inheritance tax. Our county also features the lowest real estate taxes of any county in Nevada. It raises the question, why live anywhere else at Tahoe?
The Letter of the Law
We asked Ashley Quinn, CPAs with offices nearby in Incline Village and Reno, to assist Clear Creek members considering Nevada residency. The initial consultation is on us. You can learn more at ashleyquinncpas.com
Individuals who are “domiciled” in Nevada and become Nevada residents will generally escape state taxation of their income, except for income arising from sources within another state. Even taxpayers who may continue to have a requirement to “source” one or more items of their income to a taxable state may still enjoy a significant reduction in their overall state tax burden.
A corporation organized and established in Nevada could also significantly reduce its state tax burden. States generally tax corporate business income based on the corporation’s level of activity within and outside that state. Therefore, shifting at least part of the corporation’s business activities to Nevada will generally result in a reduction of state tax. In addition, being organized and domiciled in Nevada will eliminate state taxation of the corporation’s non-business income.
Likewise, trusts with Nevada fiduciaries can gain a significant tax advantage. In California, for example, trusts with a California fiduciary are taxed on income retained in the trust, even if all beneficiaries are California non-residents. With a Nevada fiduciary, non-California source income distributed to non-California beneficiaries or retained and taxable in the trust, will escape California taxation.