California Tax After You Leave: Selling a Big Bear Home

Does California tax you after you leave the state?

California has no general "exit tax" — there's no bill you pay just for packing up and moving away. But California still taxes California-source income after you leave, and the gain on the sale of California real estate counts. So if you move to Nevada, Texas, or Florida and later sell your Big Bear cabin, California taxes the profit on that sale, and your escrow will usually collect withholding at closing. This is general information, not tax or legal advice — confirm your situation with a CPA or tax attorney.

By Rachael Smith-Meadors | August 2026

The "California exit tax" is one of the most persistent myths I hear from second-home owners who are planning a move. Someone reads a headline, gets nervous, and calls me convinced California is going to charge them a penalty for leaving. Let's clear that up, and then let's talk about the part that actually matters when you sell a Big Bear property.

The exit tax myth, cleared up

There is no general California exit tax as of 2026. California does not charge you a one-time fee or a percentage of your net worth for changing your residency and moving out of state.

You've probably seen the story. Over the past several years, lawmakers floated proposals for a statewide wealth tax that included a multi-year "exit" component for very high-net-worth households. Those proposals got a lot of press. None of them became law. As of this writing, there is no wealth tax and no general exit tax on the books in California.

So the scary version — "California will tax you for years after you leave just because you used to live here" — is not the real rule. The real rule is narrower, and it's about where your income comes from, not where you live.

The part that actually trips people up

Here's what most people don't realize until they're already at the closing table.

Once you're a nonresident, California taxes you only on California-source income. That's the key phrase. And gain from selling California real estate is California-source income — full stop. It doesn't matter that you now live in Nevada. It doesn't matter that you filed a change of residency two years ago. The property sits in California, so California taxes the profit when you sell it.

That means your Big Bear cabin in Moonridge, your lakefront place in Boulder Bay, or your cabin up in Sugarloaf is taxed by California on sale even if you haven't set foot in the state in years.

California doesn't have a separate long-term capital gains rate the way the federal system does. Capital gains are taxed as ordinary income, with rates that climb to 13.3% at the top. Most sellers land well below that top rate, but the point stands — the gain is on California's radar, and you file a California nonresident return (Form 540NR) for the year of the sale.

This catches people because they mentally "left California" and assumed they left California taxes behind. On your income, mostly yes. On the sale of California dirt, no.

If you're thinking through the numbers on a sale, my Big Bear seller services page walks through what to expect at each step, from pricing to closing.

Withholding at closing — the surprise on your settlement statement

There's a second layer, and it shows up as real dollars held back from your proceeds.

California requires real estate withholding on most sales. The standard amount is 3 1/3% (3.33%) of the total sale price — not of your gain, of the entire price. On an $800,000 Big Bear sale, that's roughly $26,600 held back and sent to the Franchise Tax Board at closing.

A few things worth understanding about how this works:

• The withholding is collected by the escrow or title company handling your closing — the "real estate escrow person," in FTB language. It's reported on Form 593.
• It is a prepayment, not an extra tax. It's credited against what you actually owe on your California return. If too much was withheld, you get the difference back when you file.
• You can elect to withhold on the actual gain at your applicable tax rate instead of 3.33% of the full price. On a property that's appreciated modestly, that election can hold back far less cash. It's done in Part VI of Form 593, and it's exactly the kind of thing you'll want to run past your CPA before closing.

When withholding doesn't apply

Not every sale gets withheld on. The most common exemptions:

• Principal residence — a property that qualifies under IRC Section 121 (you owned and lived in it as your main home for at least 2 of the last 5 years) is exempt from withholding.
• Sale price of $100,000 or less.
• A sale at a loss or zero gain, with proper documentation.
• 1031 exchanges and certain involuntary conversions.

Here's the catch for Big Bear owners. Most Big Bear cabins are second homes or short-term rentals, not primary residences. That means the principal-residence exemption usually doesn't apply, and withholding usually does. If you've been renting your place out as a vacation rental, you're clearly in second-home territory for this purpose — and there are depreciation and gain considerations that come with that. If rental income is part of your picture, it's worth understanding how a Big Bear property performs as a vacation rental investment before and during a sale.

Residency vs. source — two different questions

It helps to separate the two questions California is really asking:

1. Are you a California resident? If yes, California taxes your worldwide income. This is where the "close connection" test comes in — where you spend your time, where your main home is, where your cars and voter registration and doctors are. People who move but keep strong ties can still get pulled back in as residents, and the FTB does audit this.
2. Is this income California-source? Even for a clean nonresident, California-source income is still taxable here. Real estate gain on California property is the textbook example.

For a Big Bear seller who has genuinely moved away, question one may be settled — you're a nonresident. But question two still says California taxes the sale of your Big Bear property. Both can be true at once. A part-year resident (someone who moves mid-year) files as part-year, paying California tax on income earned while a resident plus California-source income for the rest of the year.

How this connects to timing your sale

This is where planning matters, and where I spend real time with sellers.

The tax treatment of your sale doesn't change based on the calendar the way some people hope — California taxes the California-source gain regardless of the year you've moved. But the year you sell, your other income that year, whether you do the alternative withholding election, and how a 1031 exchange might fit are all things that interact. The difference between a smooth closing and a cash-flow surprise is usually a conversation you have before you list, not after.

I'm not your CPA, and I won't pretend to be. What I can tell you is that the sellers who plan the tax piece early — loop in their tax advisor, understand the withholding, decide on the gain election — are the ones who aren't blindsided at the settlement table. This is exactly the kind of thing I flag for clients before we ever put a sign in the yard.

Frequently Asked Questions

Does California have an exit tax in 2026?

No. California has no general exit tax and no wealth tax as of 2026. Proposed wealth-tax bills with exit provisions were introduced in past years but did not become law. You are not charged a tax simply for moving out of state.

If I moved out of California, do I still owe California tax when I sell my Big Bear cabin?

Yes. Gain on the sale of California real estate is California-source income, which California taxes even for nonresidents. You'll generally file a California nonresident return (Form 540NR) for the year of the sale, no matter where you now live.

What is the California withholding on a home sale?

The standard real estate withholding is 3 1/3% (3.33%) of the total sale price, collected at closing by escrow and reported on Form 593. It's a prepayment credited against your actual California tax, and you can elect to withhold on the gain instead. Over-withholding is refunded when you file.

Is my Big Bear second home exempt from withholding like a primary residence?

Usually not. The principal-residence exemption under IRC Section 121 applies to a home you lived in as your main residence for 2 of the last 5 years. Most Big Bear cabins are second homes or short-term rentals, so withholding typically applies. Confirm your eligibility with your tax advisor.

Does California tax the whole sale price or just my profit?

California taxes your gain — the profit — as income, not the whole sale price. The 3.33% withholding is calculated on the full price only as a prepayment mechanism, and any excess comes back to you when you file your return.

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If you're planning a move out of California and thinking about when to sell your Big Bear property, the tax piece is worth mapping out before you list — not after. I'm happy to walk you through what the sale looks like from a timing and process standpoint and point you to the right questions for your CPA. Call or text me at 909.744.2190.

Disclaimer: This article is general information only and is not tax or legal advice. Tax rules change and every situation is different. Consult a qualified CPA or tax attorney about your specific circumstances, and verify current requirements with the California Franchise Tax Board.

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About Rachael Smith-Meadors
Rachael Smith-Meadors is a Broker Associate with RE/MAX Big Bear, serving buyers, sellers, and STR investors across Big Bear Lake and the surrounding mountain communities. With 10+ years in the business and a YouTube channel followed by 160,000+ people researching the market, she helps clients understand what's actually happening in Big Bear before they buy, sell, or list. Connect with her at buyinbigbearlake.com.