California taxes your income at rates that increase with how much you earn

California has a progressive income tax system, which means the tax rate you pay depends on your income level. The state does not have a flat tax — instead, you pay a higher percentage as you earn more. For the 2024 tax year, rates range from 1% on the lowest incomes to 13.3% on the highest, making California one of the highest-taxing states in the country.

The state taxes wages, self-employment income, investment gains, and retirement distributions. If you live in California for more than half the year, you owe California tax on all your income, regardless of where you earned it. If you moved to California partway through the year, you only pay tax on income earned after you became a resident.

You file California taxes using Form 540 (the main return) or Form 540-2EZ (a shorter version for simple situations). The deadline is the same as federal taxes: April 15, unless that falls on a weekend or holiday. If you file your federal return late, your California return is also late — the state does not grant separate extensions.

Key Takeaways

  • California's tax rates range from 1% to 13.3% depending on your income bracket, with higher earners paying a larger percentage.
  • You must file a California return if you earned income in the state and meet the filing threshold, even if you owe no tax.
  • The state taxes all forms of income: wages, self-employment, capital gains, retirement withdrawals, and rental income.
  • California offers tax credits and deductions that can lower what you owe, including the Earned Income Tax Credit (EITC) and dependent exemptions.

California's tax brackets and rates for 2024

Tax brackets change each year based on inflation. For single filers in 2024, you pay 1% on the first $10,099 of taxable income, then the rate steps up at each bracket. At $63,398, the rate jumps to 9.3%. At $326,644, it reaches 10.3%. At $678,878, it becomes 11.3%. At $1,000,000 and above, you pay 12.3% on most income, with an additional 1% tax on income over $1 million (the "millionaire's tax").

If you are married filing jointly, the brackets are roughly double. For example, the 9.3% rate applies to income between $126,796 and $304,093 for joint filers. Head of household filers have their own brackets, which fall between single and married rates.

These brackets apply to your taxable income, not your total income. Taxable income is what remains after you subtract the standard deduction or itemized deductions. For 2024, the California standard deduction is $5,202 for single filers and $10,404 for married couples filing jointly. If you are over 65 or blind, you get an additional deduction.

Who must file a California tax return

You must file if your income exceeds the filing threshold for your situation. For 2024, a single person under 65 must file if they earned at least $5,202 in income. A married couple filing jointly must file if their combined income was at least $10,404. These thresholds match the standard deduction, so most people who owe tax must file.

You should file even if you do not owe tax if you had taxes withheld from your paycheck or made estimated tax payments. Filing allows you to claim refundable credits like the California EITC, which can result in a refund even if you owe no tax. Self-employed people must file if their net self-employment income was $400 or more, regardless of other income.

If you are a dependent on someone else's return, the filing threshold is different. Generally, you must file if you had unearned income (like interest or dividends) of more than $1,250, or earned income of more than $5,202, or a combination of both totaling more than $800.

Tax deductions and credits available in California

California offers several deductions that reduce your taxable income. The standard deduction is the simplest — you take it automatically unless you itemize. If you itemize, you can deduct mortgage interest, property taxes (capped at $10,000 combined with state and local income taxes under federal rules, though California does not impose this cap on state returns), charitable donations, and medical expenses above a certain threshold.

The state also offers tax credits, which reduce the tax you owe dollar-for-dollar. The California Earned Income Tax Credit (CalEITC) is refundable, meaning you can receive money back even if you owe no tax. For 2024, the maximum credit ranges from $255 to $3,995 depending on your income and family size. You must have earned income to claim it, and your income must fall within the specified range.

Other credits include the Child and Dependent Care Credit, the Dependent Exemption Credit (for dependents not claimed on federal returns), and credits for education expenses. Some credits are refundable (you get money back) and others are non-refundable (they only reduce what you owe). Check the California Franchise Tax Board website or your tax software to see which credits apply to your situation.

How tax withholding works in California

If you work as an employee, your employer withholds California income tax from your paycheck. The amount withheld depends on the W-4 form you completed when you were hired. You can update your W-4 at any time if your situation changes — for example, if you got married, had a child, or took a second job.

The goal of withholding is to have enough tax taken out so that you do not owe a large amount when you file. If too little is withheld, you will owe money in April. If too much is withheld, you will receive a refund. You can adjust your withholding by changing your W-4 or by claiming additional exemptions if you expect to owe money.

Self-employed people do not have an employer to withhold tax, so they must make estimated tax payments four times a year. These are due on April 15, June 15, September 15, and January 15 of the following year. If you do not make estimated payments and end up owing more than $500 when you file, you may owe a penalty.

Special taxes and additional charges in California

Beyond the regular income tax, California imposes additional taxes on high earners. The Mental Health Tax is a 1% tax on income over $1 million, which funds mental health services. This is separate from the regular 12.3% top rate, so high earners effectively pay 13.3% on income above $1 million.

California also taxes capital gains — profits from selling stocks, real estate, or other investments — as ordinary income. There is no separate capital gains rate. Long-term capital gains (assets held over one year) are taxed the same as short-term gains, unlike the federal system.

If you owe California tax and do not pay by the deadline, the state charges interest and penalties. Interest accrues at a rate set quarterly (currently around 7% annually, but this changes). A failure-to-pay penalty of 0.5% per month applies if you do not pay by the deadline, up to a maximum of 25%. A failure-to-file penalty also applies if you do not file by the deadline, even if you cannot pay.

How to file your California tax return

You can file your California return by mail, online, or through a tax professional. The California Franchise Tax Board (FTB) accepts paper Form 540 returns mailed to the address listed on the form. Processing takes several weeks, and you will receive a notice if there are any issues.

Most people file online using tax software or a tax professional. The FTB maintains a list of approved software providers on its website. If you use a tax professional, they handle the filing for you. If your income is below a certain threshold (which changes yearly, currently around $73,000 for most filers), you may be able to file free through the FTB's Free File program or through community organizations.

You will need your Social Security number, income documents (W-2s, 1099s, K-1s), records of deductions or credits you are claiming, and your federal tax return information. If you are filing jointly, both spouses must sign the return. If you file electronically, you sign using a PIN or an electronic signature.

Frequently Asked Questions

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

Yes, if you live in California and work remotely, you owe California tax on your wages. The state taxes income based on where you live, not where your employer is located. The only exception is if you are a nonresident who worked in California temporarily — in that case, you only pay tax on income earned while you were physically in the state.

What happens if I move out of California during the year?

You are a California resident for tax purposes if you lived in the state for more than half the year. If you moved out partway through the year, you only pay California tax on income earned before you left. You will file a part-year resident return (Form 540) and report only the income earned while you were a resident. You may also need to file a return in your new state.

Can I deduct federal income tax from my California return?

No, California does not allow you to deduct federal income tax. However, you can deduct state and local income taxes (SALT) up to $10,000 on your federal return. California does not impose this limit on state returns, so you can deduct all your SALT on your California return if you itemize.

What is the penalty for filing late or paying late?

If you file late, you owe a failure-to-file penalty of 5% of the unpaid tax for the first month, then 0.5% per month after that, up to 25% total. If you pay late but file on time, the failure-to-pay penalty is 0.5% per month, also up to 25%. Interest accrues on unpaid tax at a rate set quarterly by the FTB, currently around 7% annually.

Do I need to file a California return if I only have investment income?

Yes, if your investment income exceeds the filing threshold ($5,202 for single filers in 2024), you must file. Investment income includes interest, dividends, capital gains, and rental income. Even if you do not owe tax, filing may allow you to claim credits or carry forward losses to future years.