California taxes your income at rates between 1% and 13.3%

California charges state income tax on wages, self-employment income, investment gains, and other earnings. The tax rate depends on how much you earn — it starts at 1% on the lowest incomes and rises to 13.3% on the highest. Unlike federal income tax, which has the same rates everywhere, California's rates are steeper than most other states.

You owe California income tax if you live in the state or work there, even if you live elsewhere. If you moved to California mid-year or left during the year, you file a part-year resident return and pay tax only on income earned while you were a resident.

The state collects this tax through payroll withholding — your employer deducts an amount from each paycheck — and through estimated tax payments if you're self-employed or have income with no withholding. At the end of the year, you file a California tax return to settle what you actually owe against what was already withheld.

Key Takeaways

  • California income tax rates range from 1% to 13.3% depending on your income level, and the state taxes both residents and people who work in California.
  • Your employer withholds California income tax from your paycheck, but you may owe more or receive a refund when you file your return.
  • Self-employed people and those with investment income must make estimated tax payments four times a year to avoid penalties.
  • You file your California return with the Franchise Tax Board, the state agency that administers income tax, using either Form 540 or Form 540NR depending on your residency status.
  • California allows deductions for federal income tax paid, mortgage interest, charitable donations, and other expenses, which can lower your state tax bill.

How California income tax brackets work

California uses tax brackets, which means different portions of your income are taxed at different rates. The lowest bracket starts at 1%, and each higher bracket has a higher rate. You do not pay the top rate on all your income — only on the portion that falls into that bracket.

The brackets change each year based on inflation. For 2024, a single filer with $10,000 in income pays 1% on that amount. A single filer with $70,000 pays 1% on the first portion, then 2% on the next portion, then 4%, 6%, 8%, 9.3%, and 10.3% on successive portions, depending on where each dollar falls. The highest earners pay 13.3% on income above a certain threshold, which varies by filing status.

The brackets are different for single filers, married couples filing jointly, and heads of household. A married couple filing jointly reaches the top bracket at a higher income level than a single person does, so the same dollar amount is taxed at a lower rate if you are married.

What income is subject to California tax

California taxes most types of income: wages from a job, self-employment income, interest and dividends, capital gains from selling stocks or property, rental income, and retirement distributions. Some income is exempt. Social Security benefits are not taxed by California. Certain retirement account distributions, like may have access to distributions from a Roth IRA, may not be taxed.

If you sell a home that is your primary residence, you may not owe tax on the gain if it is under $250,000 (or $500,000 if you are married filing jointly). This is a federal rule, and California follows it. Other capital gains — from selling stocks, investment property, or a second home — are fully taxable.

Income earned outside California may still be taxable if you are a California resident. If you work in another state or country, you may owe tax to both California and that location. California allows a credit for taxes paid to other states to prevent double taxation, but the credit is limited.

Withholding and estimated payments

If you work for an employer, your paycheck includes a deduction for California income tax. The amount withheld depends on the information you provide on Form W-4, which you file with your employer. If you claim too many exemptions, too little is withheld and you may owe money at tax time. If you claim too few, too much is withheld and you receive a refund.

Self-employed people, contractors, and those with significant income that has no withholding must make estimated tax payments four times a year: April 15, June 15, September 15, and January 15. Each payment covers one quarter of your expected annual tax. If you do not make these payments, you may owe a penalty even if you ultimately pay all the tax you owe.

You can adjust your withholding or estimated payments at any time during the year. If you expect a major change in income — a job loss, a bonus, a business loss — contact your employer or recalculate your estimated payments to avoid a large bill or refund at the end of the year.

Deductions and credits that lower your bill

California allows you to deduct certain expenses from your income before calculating tax. The most common deduction is the standard deduction, a fixed amount based on your filing status and age. For 2024, the standard deduction for a single filer under 65 is $5,202. If you are 65 or older, it is higher. Married couples filing jointly have a higher standard deduction than single filers.

If you itemize deductions instead of taking the standard deduction, you can deduct mortgage interest, property taxes (up to $10,000 combined with state income tax), charitable donations, and certain other expenses. Itemizing makes sense only if your total deductions exceed the standard deduction.

California also offers tax credits, which directly reduce the tax you owe rather than reducing your income. The Earned Income Tax Credit (EITC) is available to lower-income workers. The Child and Dependent Care Credit helps pay for childcare. The Renter's Credit provides relief to renters with low income. Credits are more valuable than deductions because they reduce tax dollar-for-dollar.

Filing your California return

You file your California income tax return with the Franchise Tax Board, the state agency that administers income tax. Residents use Form 540. Part-year residents and non-residents use Form 540NR. Both forms are due April 15 of the following year, the same important date as the federal return.

You can file online using tax software, by mail, or through a tax professional. The Franchise Tax Board website lists approved software providers. If you cannot afford to pay a tax professional, the Volunteer Income Tax information (VITA) program offers free tax preparation at libraries and community centers throughout California.

If you cannot file by April 15, you can request an extension, which gives you until October 15. An extension delays the filing important date but not the payment important date — tax owed is still due April 15, and interest and penalties explore to unpaid amounts after that date.

What happens if you do not pay

If you owe California income tax and do not pay by the important date, the Franchise Tax Board charges interest on the unpaid amount. The interest rate changes quarterly and is based on the federal rate plus a margin. Penalties also explore: a failure-to-pay penalty of 0.5% per month (up to 25%) and a failure-to-file penalty if you do not file a return.

The Franchise Tax Board can place a lien on your property, garnish your wages, or intercept your tax refund to collect unpaid tax. If you owe a large amount, you may be able to set up a payment plan. Contact the Franchise Tax Board directly to discuss options if you cannot pay in full.

Frequently Asked Questions

Do I have to file a California return if I live out of state?

No, unless you worked in California during the year. If you lived in California for part of the year and moved out, you file a part-year resident return and pay tax only on income earned while you were a resident. If you never lived in California but worked there, you file Form 540NR as a non-resident.

Can I deduct federal income tax from my California return?

Yes. California allows you to deduct federal income tax paid as an itemized deduction. This is one reason some people itemize instead of taking the standard deduction, especially if they also have mortgage interest or charitable donations to deduct.

What is the difference between a tax credit and a deduction?

A deduction reduces your taxable income, so it saves you tax at your marginal rate. A credit reduces your tax bill directly, dollar-for-dollar. A $1,000 credit saves you $1,000 in tax. A $1,000 deduction saves you tax at your rate — if you are in the 9.3% bracket, it saves you $93.

Do I owe California tax on money I inherited?

No. Inheritances are not subject to California income tax. However, if the inherited asset generates income — such as interest, dividends, or rent — that income is taxable. California also does not have an inheritance tax or estate tax on the person who inherits.

What if I moved to California mid-year?

You file Form 540NR as a part-year resident. You pay California tax only on income earned after you became a resident. You also pay tax on income from California sources earned before you moved, such as rental income from California property or wages from a California job.