California has the highest top income tax rate in the United States

California's top marginal income tax rate is 13.3%, applied to the highest earners in the state. This rate sits above every other state's top rate. The rate applies to income over a certain threshold that changes each year — for 2024, it kicks in at $680,000 for single filers. California also taxes capital gains at this same 13.3% rate when gains exceed $3.23 million in a single year.

No other state comes close. The second-highest top rate belongs to Hawaii at 11%, followed by Vermont and New York, both at 10.9%. Most states with income tax top out between 5% and 7%. Nine states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not wages).

California's 13.3% rate has been in place since 2012, when voters approved Proposition 30. The rate was originally set to expire in 2016 but was extended through 2030 by Proposition 63 in 2016. The state also layers in additional taxes: a 1% Mental Health Tax on income over $1 million, and a Net Investment Income Tax of 3.8% on certain investment income for high earners.

Key Takeaways

  • California's 13.3% top rate applies to single filers earning over $680,000 (adjusted annually) and is the highest in the nation.
  • The rate includes a 1% Mental Health Tax on income above $1 million and a 3.8% Net Investment Income Tax on certain investment gains.
  • Hawaii (11%), Vermont (10.9%), and New York (10.9%) have the second-, third-, and fourth-highest rates, but all fall below California.
  • Nine states collect no income tax at all, and most states with income tax top out between 5% and 7%.

How California's tax brackets work

California uses a progressive tax system, meaning the rate increases as income rises. You do not pay 13.3% on all your income — only on the portion that falls into the highest bracket. The state publishes new tax brackets every year to account for inflation.

For 2024, California's brackets for single filers are roughly: 1% on income up to $10,000; 2% from $10,000 to $23,000; 4% from $23,000 to $38,000; and so on, climbing to 13.3% on income over $680,000. Married couples filing jointly have higher thresholds at each bracket. The exact numbers shift annually, so you should check the California Franchise Tax Board website for the current year's brackets before calculating your tax.

The Mental Health Tax of 1% applies only to income over $1 million for single filers (or $2 million for married couples filing jointly). This tax was added in 2013 and is separate from the regular income tax brackets. It is not deductible on your federal return.

Why California's rate is so high

California's top rate reflects decades of tax policy decisions and voter initiatives. The 13.3% rate was not always the law. In 2012, California's top rate was 9.3%. Proposition 30, passed by voters that year, added a temporary 1% increase on all income and a 0.5% increase on the highest earners, bringing the top rate to 10.3%. In 2016, Proposition 63 added another 1% tax on income over $1 million, pushing the rate to 13.3%.

These increases were framed as temporary measures to fund education and mental health services. Proposition 30 was originally set to expire after 2016, but voters extended it through 2030. Proposition 63 is also scheduled to expire, though the date has been extended multiple times. The state legislature can also adjust rates, though changes to income tax typically require voter approval in California.

California's high rate reflects the state's large population of high earners and its reliance on income tax revenue. The state has no sales tax cap and no property tax cap (except Proposition 13, which limits property tax increases), so income tax is a major funding source for state programs.

How California compares to other high-tax states

Hawaii's 11% top rate is the second-highest, but it applies at a much lower income threshold — around $48,000 for single filers in 2024. This means middle-income earners in Hawaii pay a higher effective rate than middle-income earners in California, even though California's top rate is higher.

Vermont and New York both have 10.9% top rates. Vermont's applies to income over $246,000 for single filers; New York's applies to income over $1.08 million. New York also has a separate 3.876% tax on investment income for high earners, similar to California's Net Investment Income Tax.

Oregon (9.9%), Minnesota (9.85%), and Iowa (8.53%) round out the next tier. Most of these states have lower thresholds for their top rates than California does, meaning the tax burden falls on a broader range of earners. If you are considering moving to a high-tax state, comparing both the top rate and the income threshold matters more than the rate alone.

States with no income tax

Nine states collect no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception — it taxes dividends and interest income at 5%, but not wages.

These states typically fund government through sales tax, property tax, and other revenue sources. Sales tax rates in no-income-tax states tend to be higher than in income-tax states. For example, Tennessee has a 9.55% state sales tax, and Washington has a 6.5% state sales tax. The total tax burden depends on your spending and income mix, not just the presence or absence of income tax.

If you move to a no-income-tax state, you still owe federal income tax. Moving does not change your federal tax obligation, though it may change your state tax obligation depending on where you move and how long you stay.

What counts as income in California

California taxes most forms of income: wages, self-employment income, interest, dividends, rental income, and capital gains. The state also taxes income earned outside California if you are a resident. Residency is determined by where you spend most of your time, not where you own property or have a driver's license.

Some types of income are exempt or partially exempt. Social Security benefits are not taxed in California. Certain retirement distributions may be partially exempt depending on your age and income. Municipal bond interest is not taxed. If you receive income from multiple sources, you may owe California tax on some but not all of it.

The Net Investment Income Tax of 3.8% applies to capital gains and certain investment income when your total income exceeds $250,000 (single filers) or $500,000 (married couples filing jointly). This tax was added in 2021 and applies to gains realized in the tax year, not just gains above the threshold.

Frequently Asked Questions

Do I pay California's 13.3% rate on all my income?

No. California uses tax brackets, so you only pay 13.3% on income that falls into the highest bracket. For 2024, that means income over $680,000 for single filers. Income below that threshold is taxed at lower rates. Use the California Franchise Tax Board's tax calculator or consult a tax preparer to find your actual rate.

If I move out of California, do I still owe California income tax?

Not on income earned after you move, as long as you establish residency in another state. California considers you a resident if you spend more than half the year in the state. If you move partway through the year, you may owe California tax on income earned while you were a resident. You will need to file a part-year return and provide proof of your new residency (lease, job offer, utility bill).

Is California's income tax deductible on my federal return?

You can deduct state and local income taxes (SALT) on your federal return, but only up to $10,000 per year. This cap has been in place since 2017. If you pay more than $10,000 in California state income tax, you cannot deduct the excess on your federal return. High earners in California often hit this cap.

What is the difference between California's income tax and the Mental Health Tax?

They are separate taxes. The regular income tax uses brackets and applies to all income. The Mental Health Tax is a flat 1% tax that applies only to income over $1 million (single filers). If you earn $1.5 million, you pay regular income tax on all $1.5 million, plus an additional 1% on the $500,000 above $1 million.

Do other states have taxes similar to California's Net Investment Income Tax?

A few states do. New York has a 3.876% tax on investment income for high earners. Vermont has a similar tax. Most states do not separate investment income from wages for tax purposes. The federal government also has a 3.8% Net Investment Income Tax that applies to high earners regardless of state.