Yes, California has a state income tax, and it is one of the highest in the nation
California taxes your income at rates ranging from 1% to 13.3%, depending on how much you earn. The state applies these rates to wages, self-employment income, investment gains, and other sources. Unlike some states that have no income tax at all, California residents cannot avoid this tax—it applies to anyone who lives in the state or works there for most of the year.
The 13.3% top rate kicks in at $680,063 of taxable income for single filers (as of 2024), though most earners pay far less. California also taxes capital gains at the same rates as ordinary income, which means selling an investment property or stock can push you into a higher bracket in a single year.
Key Takeaways
- California's income tax rates range from 1% to 13.3%, with the highest rate explore to income over $680,063 for single filers.
- The state taxes wages, self-employment income, rental income, and capital gains at the same rates as ordinary income.
- You owe California income tax if you live in the state or work there for more than part of the year, even if you live elsewhere.
- California offers a standard deduction (around $5,202 for single filers in 2024) that reduces the income you actually pay tax on.
- The state allows deductions for federal income tax paid, mortgage interest, and charitable donations, though some limits explore.
How California's tax brackets work
California uses a progressive tax system, meaning your income is taxed at different rates as it climbs. You do not pay 13.3% on all your income—you pay 1% on the first chunk, then 2% on the next chunk, and so on until you reach the top bracket. The exact dollar amounts where each rate begins change every year because California adjusts them for inflation.
For 2024, a single filer pays 1% on the first $10,099 of taxable income, 2% on income from $10,099 to $23,942, and continues up through the brackets. Married couples filing jointly have higher thresholds at each bracket. The state publishes updated brackets every January, so the numbers shift slightly each year.
Your taxable income is not the same as your gross income. You subtract the standard deduction first, then any other deductions you claim. For 2024, the standard deduction is $5,202 for single filers and $10,404 for married couples filing jointly. If your income falls below these amounts, you owe no California income tax.
What income California taxes
California taxes nearly all forms of income: wages from a job, self-employment income, rental income, interest from savings accounts, and capital gains from selling investments. If you sold a house, stock, or other asset at a profit, that gain is taxable income in the year you sold it.
The state also taxes income from retirement accounts in certain situations. If you withdraw money from a traditional IRA or 401(k), that withdrawal counts as income. Distributions from a Roth IRA do not count as income because you already paid tax on the money when you contributed it. Social Security benefits are generally not taxed by California, though there are rare exceptions for very high earners.
Unemployment benefits, workers' compensation, and some disability payments are also taxable. If you received a large settlement or judgment, whether it is taxable depends on what it was for—personal injury settlements are usually not taxable, but settlements for lost wages are.
Deductions and credits that lower your bill
California allows you to deduct federal income tax paid to the IRS, which can significantly reduce your state tax bill if you paid a lot in federal tax. You can also deduct mortgage interest on your primary residence, charitable donations, and property taxes, though there are limits on some of these.
The state offers tax credits for certain situations: the Earned Income Tax Credit (EITC) for low-income workers, credits for child and dependent care expenses, and credits for adopting a child. These credits directly reduce the tax you owe, which makes them more valuable than deductions. If a credit is larger than your tax bill, you may receive a refund.
California also has a Renter's Credit for low-income renters and credits for solar energy installations on your home. The rules for each credit are specific, so it is worth checking whether you meet the requirements.
Who has to file a California tax return
You must file a California return if your income exceeds the threshold for your filing status. For 2024, that threshold is $5,202 for single filers, $10,404 for married couples filing jointly, and $13,005 for heads of household. If you earned less than these amounts, you do not have to file—though you may want to file anyway if you paid taxes withheld from your paychecks, because you could receive a refund.
You also must file if you owe self-employment tax, even if your income is below the threshold. If you are claimed as a dependent on someone else's return and you had income, the rules are different—check the Franchise Tax Board website for your specific situation.
California residents who move out of state still owe tax on income earned while they lived in California. If you moved partway through the year, you file as a part-year resident and only pay tax on income earned during the months you lived in the state.
How to file and when it is due
California uses the same filing important date as the federal government: April 15 of the year after you earned the income. If April 15 falls on a weekend or holiday, the important date moves to the next business day. You can request an extension to October 15 if you need more time, though any taxes you owe are still due on April 15—the extension only gives you extra time to file the paperwork.
You can file online through the Franchise Tax Board website, use tax software, or work with a tax professional. The state accepts federal returns filed electronically, and if you file your federal return, you can usually file your California return at the same time using the same software.
If you owe money when you file, you can pay online, by mail, or through an installment plan. The Franchise Tax Board charges interest and penalties on late payments, so paying on time saves money even if you have to borrow to do it.
Withholding and estimated taxes
If you work as an employee, your employer withholds California income tax from your paycheck based on the W-4 form you fill out. The amount withheld depends on your income, filing status, and the number of dependents you claim. If too much is withheld, you receive a refund when you file. If too little is withheld, you owe money.
If you are self-employed or have income that is not subject to withholding, you may need to pay estimated taxes four times a year. These quarterly payments are due in April, June, September, and January. If you do not pay enough in estimated taxes, you may owe penalties when you file your return, even if you ultimately paid all the tax you owed.
You can adjust your withholding at any time by submitting a new W-4 to your employer. If your income changes significantly during the year, updating your withholding can help you avoid a large bill or refund at tax time.
Frequently Asked Questions
Do I have to pay California income tax if I work in California but live in another state?
Yes. California taxes income earned within the state, regardless of where you live. If you work in California for most of the year, you owe California income tax even if your home is in Nevada, Oregon, or another state. You may be able to claim a credit on your home state's return for taxes paid to California to avoid double taxation.
What happens if I do not file a California tax return?
The Franchise Tax Board can assess penalties and interest on any taxes you owe. If you are owed a refund, you have a limited time to claim it—usually four years. If you do not file, that refund is forfeited. The state can also place a hold on your driver's license or professional licenses if you have unpaid taxes.
Can I deduct my federal income tax on my California return?
Yes. California allows you to deduct federal income tax paid in the current year. This deduction can lower your state taxable income significantly, especially if you paid a lot in federal tax. You claim this deduction on your California return, not on your federal return.
Is Social Security taxed in California?
Generally, no. California does not tax Social Security benefits for most people. However, if your total income is very high, a small portion of your benefits may be taxable. Check the Franchise Tax Board website or speak with a tax professional if you have high income and receive Social Security.
What is the difference between a deduction and a credit?
A deduction reduces the income you pay tax on, while a credit directly reduces the tax you owe. A $1,000 deduction might save you $130 in tax (at the 13% rate), but a $1,000 credit saves you exactly $1,000. Credits are more valuable, which is why they are harder to may have access to for.