SHOULD I MOVE FROM GOLD TO SILVER?
Are you thinking about leaving California for tax reasons?
With the passage of the latest tax bill, Congress has made it even more expensive to live in California than it already was. Many are considering a slip across the border from the Golden State to the Silver State, where personal income tax is zero, real estate is less expensive, and, for the Tahoe region, the benefits of living in the mountains or at the lake are still readily available.
For whom and under what circumstances does this move make sense? Take a look, because for some, the financial impact is significant, while for others, it is probably not worth the effort of relocating.
First, just what are personal income tax rates in California?
While it is a common complaint that California income tax rates are the highest in the country, that is not strictly true. California tax rates are progressive and spread over a wide range of incomes. The top marginal rate of 13.3% does not apply until you have net taxable income over $1,074,996 (after personal exemptions, adjustments, and deductions.) For lower incomes, the rate starts at 1% and moves up gradually. Note also that the rates are indexed for inflation so the brackets move up each year.
California Personal Income Tax Rates, Married filing joint return:
Net Income Marginal Rate Total Tax Actual Tax Rate
16,030 1.0% $160 1.00%
$38,002 2.0% $600 1.58%
$59978 4.0% $1,479 2.47%
$83,528 6.0% $2,876 3.45%
$105,224 8.0% $4,633 4.40%
$537,500 9.3% $44,834 8.34%
$644,998 10.3% $55,907 8.67%
$1,000,000 11.3% $96,022 9.60%
$1,074,996 12.3% $105,246 9.79%
$1,074,996+ 13.3% $105,246 + 13.3% over $1,074,996
So, if your net taxable income (after personal exemptions and either standard or itemized deductions) is $105,224, your (State) income tax is $4,633, or 4.4%. A not insignificant amount, but maybe not enough to drive you out of the state. If, however, you are bringing in a net after deductions over $500,000 a year, then your state tax is going to run more than $41,000, or about 8.3% overall. And beginning this year, your state tax is no longer deductible from your Federal return, which makes that $41,000 about $14,000 more expensive than it was when you could deduct it. So, for a total of $55,000/yr. you might indeed consider the Silver State.
If you are thinking about purchasing a home in the Lake Tahoe area, you may want to take a closer look at the Nevada side of the lake. I am licensed in both states and happy to help you on either side of the border.