Does make any difference as investor where you live? Tax purpose

[Liz C.]

Hi all, I have choice of move to Las Vegas or New York or California. I own two LLC , for tax purposes which is the best state to live? I know califronia will charge a lot fee for owning LLC. Why about Las Vegas or New York which one is better? Thanks

[David Krulac]

@Liz C.

The answer depends on other factors not just where you live. For example if you own, rent, rehab, or sell property outside of NV; even though you live in NV, you could be subject to taxes in the other states, like income taxes. If you generate income in CA, you can bet that CA will want a piece of that. Some states charge a fee to out of state LLCs; they consider an out of state LLC to be a "foreign" entity. And if you operate an LLC in CA, for example you will need to file a state income tax return for that entity in CA, as well as your home state. If I recall the CA fee is $800 per entity per year, other states also have fees and filing requirements.

Seven US states don't impose state income tax— Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.  And TN and NH don't tax earned income.  

Therefore if you live in one of the Magnificent Seven states and only do business in those states, you would not have to pay state income taxes.  CA state income tax can be as high as 13.3%, while PA is 3.07% and ND is 2.9%, most of the other states are in the 4-5% range.

David Krulac