Yes, California has a state income tax, and it is one of the highest in the nation

California taxes the income of residents and part-year residents on wages, self-employment earnings, investment income, and other sources. The state uses a progressive tax system, meaning the tax rate increases as your income rises. Tax rates range from 1% on the lowest income bracket to 13.3% on the highest, plus an additional 1% Mental Health Tax on income over $1 million. This is separate from federal income tax—you owe both.

If you work in California but live in another state, you may owe California tax on wages earned within the state. If you moved to California partway through the year, you are considered a part-year resident and owe tax only on income earned while you lived there. The state's Franchise Tax Board (FTB) administers income tax collection and enforcement.

Key Takeaways

  • California's state income tax rates range from 1% to 13.3% depending on your income level, plus a 1% additional tax on income over $1 million.
  • You owe California income tax if you are a resident, part-year resident, or nonresident who earned income within the state.
  • California taxes wages, self-employment income, capital gains, interest, dividends, and retirement distributions.
  • You file California taxes using Form 540 or Form 540-2EZ with the Franchise Tax Board, usually by the same important date as federal taxes (April 15).

How California's Tax Brackets Work

California's income tax brackets change each year based on inflation. For the 2024 tax year, a single filer with taxable income up to $10,099 pays 1%, while income between $10,099 and $23,942 is taxed at 2%. The rate climbs through several brackets, reaching 9.3% on income over $63,398. Married couples filing jointly have higher bracket thresholds but the same rates.

The 1% Mental Health Tax applies only to income exceeding $1 million in a single year. This tax was added in 2013 and applies to residents, part-year residents, and nonresidents with California-source income above that threshold. For example, if you earned $1.5 million, you would pay the regular tax on all of it plus an extra 1% on the $500,000 above $1 million.

Your actual tax bill also depends on deductions and credits you claim. California allows a standard deduction (which varies by filing status and age) or itemized deductions, similar to federal tax. Common credits include the Earned Income Tax Credit (EITC), child and dependent care credits, and education credits.

Who Must File and Pay California Income Tax

You must file a California return if you are a resident with income above the filing threshold for your age and filing status. A single person under 65 with gross income of $20,824 or more in 2024 must file. The threshold is higher for married couples and for people 65 and older. Part-year residents file if their income while living in California exceeds the threshold.

Nonresidents who earned income in California—such as actors filming in Los Angeles or contractors working on California projects—must file Form 540-NR and pay tax on California-source income only. Even if you do not owe tax, filing may be worthwhile if you had taxes withheld or are may have access to to refundable credits like the EITC.

If you are a full-year resident, you report all income from all sources, regardless of where it was earned. If you moved to California during the year, you report only income earned after you became a resident. If you moved out, you report only income earned before you left.

Types of Income California Taxes

California taxes wages and salaries, self-employment income, interest, dividends, capital gains, rental income, retirement distributions from IRAs and 401(k)s, and gambling winnings. Long-term capital gains (assets held over one year) are taxed at the same rates as ordinary income in California, unlike the federal system, which has preferential rates for long-term gains.

Some income is exempt from California tax. These include certain disability benefits, workers' compensation, some military pay, and death benefits. Social Security benefits are generally not taxed by California, though they may be taxed federally. Roth IRA withdrawals of contributions (not earnings) are not taxed. If you are unsure whether a specific income source is taxable, the FTB website and Form 540 instructions provide detailed guidance.

Filing Your California Return

Most California residents file Form 540 (the long form) or Form 540-2EZ (the short form for straightforward returns). You can file by mail, electronically through the FTB website, or using tax software that supports California returns. The important date is usually April 15, the same as federal taxes. If you file your federal return late, your California return is also considered late unless you file it by the California important date.

You will need your Social Security number, income documents (W-2s, 1099s, K-1s), records of deductions or credits you claim, and information about any estimated tax payments or withholding. If you had taxes withheld from paychecks, your employer provides a W-2 showing the amount. If you are self-employed, you calculate your own tax and may need to make quarterly estimated payments to avoid penalties.

The FTB processes returns and issues refunds. If you are owed a refund, filing electronically typically results in a faster refund than filing by mail. You can check the status of your return on the FTB website using your Social Security number and filing status.

Deductions and Credits Available in California

California allows a standard deduction based on your filing status and age. For 2024, the standard deduction for a single filer under 65 is $5,202, and for married filing jointly it is $10,404. If you are 65 or older, the standard deduction is higher. You can also itemize deductions if they exceed your standard deduction, though California does not allow deductions for state and local taxes (SALT) above $10,000, matching the federal limit.

The California Earned Income Tax Credit (CalEITC) is a refundable credit for low-income workers. The amount depends on your income, filing status, and number of dependents. You can claim it on your Form 540. Other credits include the Child and Dependent Care Credit, the Education Credits (American Opportunity and Lifetime Learning), and the Renter's Credit for low-income renters. Some credits are refundable, meaning you receive money back even if you owe no tax.

What Happens If You Do Not Pay

If you owe California income tax and do not pay, the FTB can assess penalties and interest. Failure-to-file penalties are typically 5% of the unpaid tax per month, up to 25%. Failure-to-pay penalties are 0.5% per month. Interest accrues daily at a rate set quarterly by the FTB. These charges compound, so unpaid tax grows quickly.

The FTB can also place a lien on your property, garnish your wages, or intercept your state refund to cover unpaid tax. If you cannot pay in full, you can request a payment plan or an offer in compromise (settlement for less than you owe). Contact the FTB directly to discuss your options—waiting typically makes the situation worse.

Frequently Asked Questions

Do I owe California tax if I moved out of state?

You owe tax only on income earned while you were a California resident. If you moved out partway through the year, file as a part-year resident and report only the income you earned before you left. Keep documentation of your move date, such as a lease ending, utility shutoff notice, or driver's license change.

What is the difference between California and federal income tax?

California and federal governments both tax income, but they use different rates and rules. Federal tax rates are lower and have preferential rates for long-term capital gains. California taxes long-term gains at ordinary rates. You file separate returns and owe both taxes. Federal taxes go to the U.S. Treasury; California taxes go to the state.

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

No. California does not allow a deduction for federal income tax paid. You also cannot deduct state and local taxes (SALT) above $10,000 total, which includes state income tax, property tax, and sales tax combined.

Do I have to file if I had taxes withheld but do not owe?

If you had California taxes withheld and do not owe tax, you are not required to file. However, filing may be worthwhile if you are may have access to to refundable credits like the CalEITC, which can result in a refund even if you owe no tax.

What if I am self-employed—do I owe California income tax?

Yes. Self-employed people owe California income tax on net self-employment income. You also owe self-employment tax (Social Security and Medicare) to the federal government. California does not have a separate self-employment tax, but you deduct half your self-employment tax when calculating California taxable income.