There’s no secret that Northern Nevada is a wonderful place to live. One of the biggest draws of the Silver State has been its historically low tax structure.
The Private Bank by Nevada State Bank released the latest edition of its High Net Worth Report series last fall and it outlined the tax benefits for high-net-worth households in Nevada.
Below are just a few highlights from the report:
- In Nevada, a household with an annual income of just over $600,000 can expect to save an estimated $70,000 each year in total taxes paid compared to California.
- A majority of the relative tax burden for households in California is related to state income taxes. By living in Nevada, which has no state income tax, high net worth households can save thousands of dollars a year. For an individual in this example, earning a minimum salary of $610,000 per year, the savings in income taxes alone equate to more than $57,000.
- Nevada’s property tax rates are generally higher than California’s, but that difference is largely diminished since Nevada assesses taxes based on 35% of a property’s taxable value, compared to 100% in California. Comparable homes in Nevada are also significantly cheaper. The combination of these two factors means the hypothetical individual could save more than $11,000 annually in property taxes.
- The sales tax rate in Nevada, in combination with the lower cost of living, means households in the Silver State can expect to pay lower taxes annually on all taxable purchases. The hypothetical individual would save an estimated $1,600 per year in sales taxes.
“Nevada remains a tax-friendly locale for high net worth households overall,” said James Rensvold, executive vice president and director of private banking. “Given the recent change to the federal tax code that limited deductions of state and local taxes, higher-tax states such as California have become even more burdensome for residents, increasing the tax advantages of living in Nevada.”
In order to take advantage of Nevada's "tax hospitality" a taxpayer must make Nevada its principal place of residence, i.e. your primary home. Residency is single most important factor in gaining Nevada's tax advantages.
A "close connection test" is implemented and must be passed in order for a taxpayer to establish state residency. The "close connection test" identifies if Nevada is the state in which a taxpayer has the closest social and business contacts, and more. Individuals who are considered "domiciled" in Nevada generally escape taxation. A corporation organized and domiciled in Nevada can also significantly reduce its state tax burden by shifting its corporate level of activity to the state of Nevada.
Owning real estate in the state of Nevada is key factor when considering such tax advantages. Contact our team today to stake your claim in Nevada’s friendly tax structure and real estate market.