I have been here more than 5 years so able to take the $250k tax break. My gain is a bit more then that but once I discount for realtor commission and costs I paid to fix things I should come out without having to pay any taxes. I'm in the OC and prices in my hood are in the $500 plus range (1950's 3/2 tract homes about 1000 sf). Most other investments are in tax deferred stuff that I'll get when older and otherwise have a low enough taxable income I don't have to pay Cali or fed income taxes plus no ACA as I use the VA. So no issue keeping g residence in California.
Oh wait ...DoH! I just realized I'd have to consider the income tax consequences of the money I'd get from the house sale since I'd stash that and rent/travel for a few years before buying another place. So yeah, as LAGuy pointed out, changing residency out of Cali to an income tax free state might be something to do .
Just want to make sure you're clear on the tax situation on a home sale. It sounds like in this post you're thinking that you can roll over the cost basis of your home into a newly purchased home? I'm not totally sure if that's what you mean, but that's a common misconception that's a holdover from the way the tax law used to work back in the 90's and before. The $250,000 tax break on the profit of your home is the ONLY break you'll see. You cannot roll over the basis in your personal abode. If you turn the property into a rental, it then becomes an investment property. You CAN rollover the basis of an investment property when you sell it and purchase a new investment property. However, you will LOSE the ability to claim the $250,000 tax break after 3+ years (you will not have lived in the property for 2 of the past 5 years). So, if you turn it into a rental and THEN decide that being a nomad is for you a few years down the line and sell your house, you'll be paying the full tax bill on your home appreciation.
Regardless of your state of residence, California WILL be wetting their beak on the sale of your home (after your $250,000 break). It was bought there. It was sold there. You owe taxes there. Relocating your state of residence is only so you can avoid CA taxes on your investment income. In California, EVERYTHING is regular income. And you'll pay income tax on it. So if you've got money coming down the line, CA is going to take their cut. It's easy enough to avoid the taxes for the most part if your income is low - California has a progressive tax rate and the "poor" pay very little in taxes. But, once you start trying to get at your tax deferred stuff it can be tough to have enough tax free cap space to work with. That's why in California a 401k is such a great deal: defer Federal taxes, and avoid California taxes entirely by tapping it after you get out!
The Obamacare surcharge I spoke of has nothing to do with your personal healthcare. It's a tax on the incomes of the "rich" to pay for Obamacare. Of course, if you sell your home for a boatload of cash in one year, you've just joined the ranks of the wealthy. Go plug some big capital gain number into Tax Caster. You'll see some separate line item taxes for AMT and Obamacare surcharge. The point is: the low tax basis in your property that you get by holding onto your property is just an illusion. The tax man will get his share down the line when you sell for a really large gain. Once you've hit your $250,000 tax exclusion, the value of home appreciation gains start to look decidedly less impressive.