California rich seeking Nevada tax haven
August 29, 2013
Since the start of the year, Lakeshore Realty has closed 39 residential sales along the Nevada shores of Lake Tahoe to buyers who are moving from California.
Fifteen of the buyers — 40 percent of the total — specifically say they're moving to Nevada to escape the burdens of California's Prop. 30 tax hikes, says Chris Plastiras, broker of the real estate firm headquartered at Incline Village.
Plastiras isn't alone.
Real estate brokers through the Lake Tahoe and Reno markets say sales of upper-end homes have been buoyed since the start of the year by California residents who make no bones about their desire to get beyond the reach of the Golden State taxman.
The rush to Reno and Lake Tahoe began with a boom in the first weeks after California voters approved Prop. 30 last November, but the stream of Californians who have decided that home is going to mean Nevada stayed strong.
Here's what they're escaping:
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Prop. 30 created four high-income tax brackets for California residents, and it boosted the tax rates by anywhere from 10 percent to nearly 30 percent for wealthy Californians.
The state tax rate for taxpayers who make $1 million or more, for instance, rose to 13.3 percent from the previous 10.3 percent.
While the measure calls for the higher tax rates to expire after seven years, many of the folks who pay the new levy — an estimated 3 percent of California's taxpayers — have decided that Nevada's income-tax-free environment looks far more welcoming, says Carole Madrid, an agent with Lakeshore Realty.
Madrid recently listed a $12.6 million lakefront estate in Incline Village, and she expects the property will be purchased by someone fleeing a high-tax environment.
Craig King, chief operating officer of Chase International, a brokerage with offices at Lake Tahoe and Reno, notes that home sales are stronger this year along the Nevada side of Lake Tahoe than they are on the west shore in California. That's a reversal of last year's trend.
"Prop. 30 probably has something to do with that," he says.
Lexi Cerretti, an agent at Lake Tahoe for Sierra Sotheby's International Realty, says California buyers also are benefitting from some fortunate timing in the market.
Home prices in San Francisco, Silicon Valley and the Wine County have steadily climbed in the past couple of years, she says, but prices for luxury homes at Lake Tahoe just are beginning to stir. That allows Californians to sell high and buy low — at least relatively low.
Data collected by First Centennial Title in Incline Village, Cerretti says, shows that buyers from California accounted for 43 percent of the 288 sales so far this year in Incline Village and Crystal Bay.
In Reno, buyers from California rushed across the Sierra late last year because Prop. 30 was backdated to cover earnings in all of 2012, even though it was approved by voters late in the year, says Rebecca Dickson, who specializes in luxury sales at Reno-based Dickson Realty.
During just one month shortly after the election, Dickson's agents at the Montreux golf-course community fielded 70 calls from Californians looking for a new home in tax-friendly Nevada.
The pace has slowed a bit, Dickson says, but the California caravan continues.
The demand, she says, is helping to support an upper-end market that has been slower to recover than other segments of the residential market.
Through August 15, the Reno-Sparks market saw 33 homes valued at $1 million or more close escrow.
But that's from an inventory of 128 homes in that price range, which means that the high-end California buyers continue to have lots of selection.
"Although things have improved in parts of the market there is still some lag and rebalancing occurring in the high end," Dickson says.
Chase International expects the exodus of Californians to continue to unfold for several years in Reno.
King says the company's agents are talking with numerous potential buyers who are either retiring — or planning to retire — from jobs in California. They're shopping for homes in Reno to escape California' tax environment, he says.
At the same time, he says Chase agents are talking with a number of California entrepreneurs, many of them owners of mid-sized companies in the Central Valley, who want to move their companies lock-stock-and-barrel to Nevada.
Those business owners want to move to protect their own pocketbooks from the taxman, and they want the companies that they've built to remain close to their homes.
"That's a real concrete indicator of what's going on," King says.