Thinking about selling your Lake Tahoe vacation home or investment property?
short answer: Selling an income-producing or second home around Lake Tahoe involves unique tax considerations and timing strategies. Understanding the basics—before you list—can save money and reduce surprises.
First Things First: Taxes & Disclaimers
When selling real estate in California or Nevada—especially in an area like Lake Tahoe—it’s important to know that I’m your local real-estate agent, not a tax advisor. The information below is for educational purposes only. Always review your individual situation with your CPA or financial planner before making tax-related decisions.
That said, having a working understanding of how sales are treated can help you plan your strategy and communicate more effectively with your tax professional.
Vacation Home vs. Rental Property: What’s the Difference?
Vacation Homes (Personal-Use):
If you’ve primarily used your Tahoe home for personal enjoyment, the IRS generally treats it as a personal residence.
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You may owe capital-gains tax on the difference between your adjusted basis (purchase price + improvements) and sale price.
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Long-term capital-gains rates (0–20%) depend on your income bracket.
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Unfortunately, the $250,000 / $500,000 primary-residence exclusion typically doesn’t apply unless you’ve lived in the property for two of the last five years.
Rental or Investment Properties:
If your property has been rented out (short- or long-term), additional factors come into play:
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Depreciation recapture: Any depreciation you’ve claimed on tax returns must be “recaptured” at up to 25%.
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Capital gains: Still apply on overall profit from the sale.
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1031 exchange: You may defer both if you roll proceeds into another qualifying investment property (more on that below).
1031 Exchanges: A Strategic Option
A Section 1031 exchange allows investors to defer capital gains taxes by reinvesting proceeds into another “like-kind” property within set time frames:
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45 days to identify potential replacement properties.
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180 days to close on one or more of them.
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The new property must be of equal or greater value, and funds must move through a qualified intermediary—not directly to you.
This approach is common for Tahoe owners selling a high-value rental and trading into a more manageable or diversified property elsewhere (for example, trading a vacation duplex for multiple long-term rentals or a commercial asset).
Because tax rules evolve, always confirm with a 1031-exchange accommodator or CPA before moving forward. (IRS.gov 1031 Exchange Reference)
Timing Your Sale in the 2025 Market
Timing still matters—even for investment properties.
According to 2025 MLS data, the median sold price in South Lake Tahoe is around $680,000, with waterfront and ski-access homes averaging well above $1 million. Inventory typically peaks between May and August, while winter listings face less competition but slower buyer traffic.
Here’s how to think about it:
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Spring–Summer: Highest buyer volume, especially for second-home shoppers and investors planning for next rental season.
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Fall–Winter: Lower inventory and potentially less competition—meaning your property could stand out if priced strategically.
Regardless of season, a strong marketing plan and realistic pricing—supported by detailed financials (income, expenses, booking history)—help investors see value and act fast.
Partnering with Local Experts
Because Tahoe’s market spans two states and multiple tax jurisdictions, it’s smart to build your team early:
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Real-estate agent (that’s me): Market analysis, timing, pricing, and exposure.
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CPA or enrolled agent: Tax optimization and 1031-exchange planning.
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Local professionals: I can connect you with contractors, stagers, inspectors, and property managers to prepare the home for sale and present it at its best.
Final Takeaway
Selling a vacation or investment property in Lake Tahoe blends strategy, timing, and expert guidance. Whether you’re cashing out of a long-held rental, completing a 1031 exchange, or transitioning from a vacation home, understanding the fundamentals helps you keep more of your gains and move forward with confidence.
