California's income tax rates depend on how much you earn
California has a progressive income tax system, meaning the rate you pay increases as your income goes up. The state does not have a single flat tax. Instead, you pay different percentages on different portions of your income, with rates ranging from 1% on the lowest bracket to 13.3% on the highest.
The exact amount you owe depends on your filing status (single, married filing jointly, head of household, or married filing separately) and your total taxable income for the year. California also adds a 1% Mental Health Tax on income over $1 million, which applies only to high earners.
Your employer typically withholds California income tax from each paycheck based on the W-4 form you complete. If too much is withheld, you receive a refund when you file your return. If too little is withheld, you owe the difference.
Key Takeaways
- California income tax rates range from 1% to 13.3% depending on your income level and filing status, with rates increasing as you earn more.
- Sales tax in California is 7.25% statewide, but your local rate is usually higher because counties and cities add their own taxes, typically bringing the total to 8% to 10.25%.
- Property tax in California is capped at 1% of the assessed property value under Proposition 13, plus any local voter-approved bonds or assessments.
- You can find your exact local sales tax rate by entering your zip code on the California Department of Tax and Fee Administration website.
- Self-employed people in California must pay both the employee and employer portions of Social Security and Medicare taxes, in addition to state income tax.
How California income tax brackets work
California publishes new tax brackets each year because they adjust for inflation. The brackets are different for each filing status. For example, a single filer in 2024 pays 1% on income up to a certain amount, then 2% on the next bracket, and so on, up to 13.3% on income above a much higher threshold.
You do not pay 13.3% on all your income if you reach the top bracket. You only pay that rate on the portion of your income that falls into that bracket. The rest is taxed at the lower rates that apply to each bracket below it. This is why the system is called progressive.
To find the exact 2024 or 2025 brackets for your filing status, visit the California Franchise Tax Board website or use the tax tables they publish each year. The brackets change annually, so using last year's numbers will give you an incorrect estimate.
Sales tax varies by location
California's base sales tax rate is 7.25%, but that is rarely what you actually pay. Most counties and cities add their own local sales taxes on top of the state rate. Your total sales tax depends on where you make the purchase.
Local rates typically range from 8% to 10.25%, though some areas are higher or lower. A purchase in one city might be taxed at 8.5%, while the same purchase in a neighboring city could be 9.375%. The difference comes from county, city, and special district taxes stacked together.
To find your exact local sales tax rate, enter your zip code on the California Department of Tax and Fee Administration website. You can also call your city or county assessor's office. Some items are exempt from sales tax in California, including most groceries, prescription medications, and medical equipment, though the rules are specific and have exceptions.
Property tax is based on assessed value, not market value
California property tax is capped at 1% of the assessed value of your property under Proposition 13, a law passed in 1978. The assessed value is usually much lower than what your home is actually worth on the market. This is one reason California property taxes are lower than in many other states, even though home prices are high.
When you buy a property, it is reassessed at its purchase price, and that becomes the new assessed value. After that, the assessed value can increase by no more than 2% per year, regardless of how much your home's market value rises. It only resets to market value if the property is sold again.
In addition to the 1% base tax, you may owe local voter-approved bonds or special assessments for schools, fire districts, water systems, or other services. These vary by location and can add significantly to your property tax bill. Check your county assessor's website to see what assessments apply to your specific property.
Self-employment tax is separate from income tax
If you are self-employed, you pay California income tax on your net business income just like any other resident. But you also owe self-employment tax, which covers Social Security and Medicare. This is a federal tax, not a state tax, but it is a major cost for self-employed people.
Self-employed people pay both the employee and employer portions of Social Security and Medicare taxes. The combined rate is 15.3% on 92.35% of your net self-employment income. You can deduct half of this tax when calculating your adjusted gross income, which reduces your taxable income slightly.
You must file Schedule C (Profit or Loss from Business) with your California tax return to report self-employment income. You also file Schedule SE with your federal return to calculate self-employment tax. Many self-employed people make quarterly estimated tax payments to the state and federal government to avoid owing a large amount when they file their annual return.
Tax credits and deductions can lower what you owe
California offers tax credits for certain situations, such as having dependent children, paying for childcare, or earning below certain income thresholds. A tax credit directly reduces the amount of tax you owe, dollar for dollar. A tax deduction reduces your taxable income, which then lowers your tax bill indirectly.
The standard deduction for California varies by filing status and age. For 2024, a single filer under 65 has a standard deduction of $5,202. Married filing jointly filers have a higher standard deduction. If your total deductions are less than the standard deduction, you use the standard deduction. If you have more deductions, you can itemize them instead.
Common California deductions include state and local taxes (up to a federal limit), mortgage interest, charitable donations, and business expenses if you are self-employed. You report deductions on your California tax return, Schedule CA (540 or 540NR). The Franchise Tax Board website has a full list of credits and deductions you may be able to use.
Frequently Asked Questions
Do I have to pay California income tax if I live out of state but work in California?
Yes. California taxes you on income you earn in the state, even if you live elsewhere. You file a part-year or nonresident return (Form 540NR) and report only the income you earned in California. You may also owe taxes to your home state, though some states have reciprocal agreements that prevent double taxation.
What is the difference between the state income tax rate and my effective tax rate?
Your marginal rate is the percentage you pay on your last dollar of income. Your effective rate is your total tax divided by your total income. Because California is progressive, your effective rate is always lower than your marginal rate. For example, you might have a marginal rate of 9.3% but an effective rate of 5.2%.
Are Social Security benefits taxed in California?
No. California does not tax Social Security benefits. However, the federal government may tax a portion of your benefits depending on your total income. If you receive Social Security, you still file a California return if you meet the income threshold, but you do not include the Social Security portion in your California taxable income.
Can I deduct federal income tax from my California taxes?
No. California does not allow you to deduct federal income tax paid. You can deduct state and local taxes (SALT) up to $10,000 per year on your federal return, but this is a federal rule, not a California rule. California has its own deduction limits that do not include federal taxes.
What happens if I do not file a California tax return?
The Franchise Tax Board can assess penalties and interest on unpaid taxes. If you owe money, the debt can grow significantly over time. If you are owed a refund but do not file, you can claim it for up to four years. If you think you do not owe taxes, you should still file to protect your refund.