California taxes your income at rates that depend on how much you earn

California state income tax is a tax on the money you make from wages, self-employment, investments, and other sources. California uses a progressive tax system, meaning the tax rate increases as your income increases. You do not pay one flat rate on all your income — instead, different portions of your income are taxed at different rates, with higher earners paying higher rates on the money above each threshold.

The state collects this tax through payroll withholding if you are an employee, or through quarterly estimated tax payments if you are self-employed. If you do not pay enough during the year, you owe the difference when you file your tax return. If you overpay, you receive a refund.

California's tax rates range from 1% on the lowest income to 13.3% on the highest, plus an additional 1% Mental Health Tax on income over $1 million. These rates change slightly each year because the income brackets adjust for inflation.

Key Takeaways

  • California taxes income at rates between 1% and 13.3%, depending on your total income for the year.
  • The tax is progressive, meaning you pay different rates on different portions of your income, not one rate on everything.
  • If you work as an employee, your employer withholds tax from each paycheck; if you are self-employed, you pay estimated taxes quarterly.
  • Your filing status (single, married filing jointly, head of household) determines which tax brackets and rates apply to you.
  • You must file a California tax return if your income exceeds certain thresholds, which vary by age and filing status.

How the progressive tax brackets work

California divides income into brackets, and each bracket has its own tax rate. For example, if you are single, your first portion of income up to a certain amount is taxed at 1%, the next portion up to a higher amount is taxed at 2%, and so on. You do not jump into the highest bracket all at once — only the income that falls within each bracket is taxed at that rate.

The bracket thresholds change every year. For the 2024 tax year, a single filer's brackets start at 1% and increase through 9.3% at the standard rate, with the additional 1% Mental Health Tax applying to income over $1 million. Married couples filing jointly have higher thresholds before entering each bracket, and head of household filers have their own set of thresholds.

Because brackets adjust annually for inflation, the income amounts that trigger each rate shift slightly from year to year. The Franchise Tax Board publishes updated brackets each tax year, and your tax software or return form will show the brackets that apply to the year you are filing for.

Who must file a California tax return

You must file a California return if your income exceeds a threshold that depends on your age and filing status. For the 2024 tax year, a single person under 65 must file if their income is over $23,942. A single person 65 or older has a higher threshold. Married couples filing jointly have a different threshold, as do head of household filers and those claiming dependent status.

Even if your income is below the filing threshold, you may want to file anyway — for example, if you had taxes withheld from your paychecks, you may be owed a refund. If you are self-employed, you generally must file if your net earnings from self-employment are $400 or more, regardless of your total income.

Non-residents and part-year residents of California have different rules. If you moved to or from California during the year, you file a part-year resident return and only report income earned while you were a California resident.

Payroll withholding and estimated tax payments

If you are an employee, your employer withholds California income tax from your paycheck based on the W-4 form you complete. The amount withheld depends on your filing status, the number of dependents you claim, and any additional withholding you request. If you do not have enough withheld, you will owe tax when you file. If too much is withheld, you receive a refund.

If you are self-employed or have income that is not subject to withholding — such as rental income, investment income, or business income — you must pay estimated taxes quarterly. These payments are due on April 15, June 15, September 15, and January 15 of the following year. You calculate estimated tax based on your expected income for the year and pay one-quarter of that amount each quarter.

If you underpay estimated taxes, the Franchise Tax Board may charge you a penalty and interest on the unpaid amount. You can adjust your estimated payments if your income changes during the year.

Deductions and credits that reduce your tax

California allows you to reduce your taxable income through deductions. You can choose either the standard deduction or itemize your deductions. The standard deduction varies by filing status and age — for 2024, a single person under 65 has a standard deduction of $5,202, while a married couple filing jointly has a standard deduction of $10,404. These amounts increase each year.

If you itemize, you can deduct expenses such as state and local taxes (up to $10,000 combined), mortgage interest, charitable contributions, and certain medical expenses. You must keep records to support itemized deductions if you are audited.

California also offers tax credits that directly reduce the tax you owe. Credits differ from deductions because they subtract directly from your tax bill rather than from your income. Examples include the California Earned Income Tax Credit (CalEITC) for lower-income workers, the Child Tax Credit, and credits for dependent care expenses. Some credits are refundable, meaning you can receive money back even if you owe no tax.

Special taxes and additional amounts you may owe

In addition to the regular income tax rates, California imposes a 1% Mental Health Tax on income over $1 million. This tax applies to all types of income — wages, self-employment, capital gains, and other sources. It is separate from the regular income tax and is calculated on your total income for the year.

If you have capital gains (profit from selling stocks, real estate, or other assets), those gains are taxed as ordinary income in California, unlike some other states. Long-term capital gains and short-term capital gains are both taxed at your regular income tax rate.

If you owe more than $150,000 in tax for the year, you may be subject to the Franchise Tax Board's underpayment penalty if you did not pay enough throughout the year. Self-employed people and those with irregular income should pay close attention to estimated tax requirements to avoid this penalty.

How to file your California tax return

You file your California return using Form 540 (the standard return) or Form 540-2EZ (a shorter form for simple returns). You can file by mail or electronically through the Franchise Tax Board's website or through tax software. Electronic filing is faster and reduces errors — the Franchise Tax Board processes e-filed returns more quickly than paper returns.

You must include your Social Security number or Individual Taxpayer Identification Number (ITIN) on your return. If you are married filing jointly, both spouses' numbers are required. You also need documentation of your income, such as W-2 forms from employers or 1099 forms for self-employment and investment income.

The filing deadline is typically April 15, though it may shift if that date falls on a weekend or holiday. If you cannot file by the deadline, you can request an automatic extension to October 15, though this extends only the filing deadline — you still owe any tax due by April 15 or you will face penalties and interest.

Frequently Asked Questions

Do I have to pay California income tax if I work remotely for an out-of-state company?

Yes. If you are a California resident, you owe California income tax on all income you earn, regardless of where your employer is located or where you work. California taxes residents on worldwide income. If you moved out of state during the year, you file a part-year resident return and only pay tax on income earned while you were a California resident.

What is the difference between California state income tax and federal income tax?

California state income tax goes to the state and funds state programs. Federal income tax goes to the federal government. They are separate taxes with different rates, brackets, and rules. You file both a California return and a federal return. Some deductions and credits differ between the two systems.

Can I deduct federal income tax from my California taxable income?

No. California does not allow you to deduct federal income tax paid. However, you can deduct state and local taxes (including California income tax, property tax, and sales tax) up to $10,000 combined on your federal return if you itemize deductions.

What happens if I do not pay my California income tax?

If you owe tax and do not pay by the deadline, the Franchise Tax Board charges penalties and interest. The penalty starts at 5% of the unpaid tax and increases over time. Interest accrues daily at a rate set quarterly by the state. The Franchise Tax Board can also place a lien on your property, garnish your wages, or offset your refunds from other state programs.

Is there a way to reduce my California income tax if I have a low income?

Yes. The California Earned Income Tax Credit (CalEITC) provides a refundable credit for workers with low to moderate income. You may also be able to claim the Child Tax Credit, dependent care credits, or other credits depending on your situation. Check the Franchise Tax Board's website or your tax software to see which credits you may be able to claim.