Selling in California and Moving to Nevada

Selling a primary home in California and moving to Nevada is one of the most common financial pivots I see, and it’s usually driven by taxes, cost of living, or both. On paper it looks simple: sell the house, move, enjoy no state income tax. In reality, the timing, paperwork, and tax treatment matter a lot more than people expect, and mistakes can be expensive.

From a federal tax standpoint, selling a primary residence is usually straightforward. If you’ve lived in and owned the home for at least two of the five years before the sale, you can generally exclude up to $250,000 of gain if you’re single or $500,000 if you’re married filing jointly. That exclusion applies regardless of whether the home is in California, Nevada, or anywhere else. Where people get tripped up is assuming that means “no tax at all” without actually running the numbers. Appreciation in many parts of California has been dramatic. If you bought years ago, remodeled heavily, or converted a rental back into a residence, your gain may be larger than you think, and documentation becomes critical.

California follows the federal exclusion rules, but it does not follow you out the door. California taxes income sourced while you were a resident or income sourced to California property. The sale of a California home is California-source income, even if you move to Nevada the day after closing. That means if there is taxable gain beyond the federal exclusion, California will want its cut. Moving before or after the sale does not change that. What does matter is whether the home truly qualifies as your primary residence and whether you can substantiate that with records like driver’s licenses, voter registration, utility bills, and occupancy history.

Another issue that catches people off guard is depreciation recapture. If the home was ever rented, even partially, depreciation claimed or allowable during that rental period can come back into play. That portion of the gain is not excluded under the primary residence rules and is taxed at different rates federally, and yes, California will still tax that piece too. This is especially common with homes that were rented for a few years, then moved back into before sale. The “I lived there again so it’s all excluded” assumption is simply wrong.

Once the sale is complete and you move to Nevada, your tax picture does change, but not automatically. Nevada has no state income tax, which is a major benefit, but you need to establish Nevada residency properly. California is aggressive about residency audits, especially when high earners leave. If you sell a home, move to Nevada, but keep strong ties to California, they may argue you never really left. That means you should be intentional about cutting California residency ties and building Nevada ones. That includes changing your driver’s license, registering vehicles, updating voter registration, moving doctors, dentists, and professionals, and actually spending more time in Nevada than California.

Timing also matters. If you sell your California home late in the year and move to Nevada in December, you may still be a part-year California resident. California will tax income earned while you were a resident, even if you’re gone by year-end. This doesn’t negate the benefit of moving, but it does affect how much tax you save in that first year. The bigger benefits usually show up in future years once wages, business income, retirement income, and investment income are no longer subject to California tax.

Property taxes are another area people overlook. California’s Proposition 13 keeps property taxes artificially low for long-time homeowners. When you sell and move to Nevada, you’re giving that up. Nevada property taxes are generally lower than California’s market-rate taxes, but higher than what many long-term California homeowners were paying. That’s still usually a net win, but it’s worth understanding upfront so there are no surprises.

There are also planning opportunities around the sale itself. Improvements made to the home can increase your basis and reduce taxable gain, but only if you can prove them. That means receipts, invoices, and records, not rough estimates. Selling costs like commissions and escrow fees also reduce gain. These details matter far more in high-value California real estate than they do in most other states.

For people moving to Nevada to retire or run a business, the long-term benefits are real. No state tax on wages, business income, retirement distributions, or capital gains can add up quickly. But the transition year is where most mistakes happen. California doesn’t care about your intent to leave, only about facts and timing. Nevada doesn’t automatically grant you residency just because you bought a house there.

The bottom line is that selling a primary home in California and moving to Nevada can be financially smart, but it’s not a DIY decision if real money is involved. The sale itself, prior use of the property, the size of the gain, and how cleanly you break from California all affect the outcome. Done correctly, it can save tens of thousands of dollars over time. Done sloppily, it can trigger audits, unexpected taxes, and stress that people didn’t see coming.