California taxes your income at rates between 1% and 13.3%, depending on how much you earn

California has a progressive income tax system, which means the tax rate increases as your income goes up. If you earn $10,000 a year, you pay a lower percentage than someone earning $500,000. The state sets tax brackets that change each year based on inflation — so the income ranges that trigger each rate shift upward annually.

The highest earners in California pay 13.3%, the top rate in the nation. But most people pay far less. A single person earning $50,000 in 2024 pays roughly 6% to 8% depending on exactly where their income falls within the brackets. The actual amount you owe also depends on deductions, credits, and whether you have income from sources other than wages.

California taxes all income — wages, self-employment earnings, investment gains, rental income, and retirement withdrawals. Federal income tax is separate; you owe both. Some states have no income tax at all, but California does, and it is one of the largest sources of state revenue.

Key Takeaways

  • California's income tax rates range from 1% to 13.3%, with higher earners paying the higher percentage.
  • Tax brackets adjust each year for inflation, so the income ranges that trigger each rate change annually.
  • You owe California income tax on wages, self-employment income, investment gains, and retirement withdrawals.
  • You file California taxes separately from federal taxes using Form 540 or a shorter form if your income is below a certain threshold.
  • Deductions and credits can lower the amount of tax you owe, including the standard deduction and dependent credits.

How the tax brackets work

California's tax brackets are structured so that not all of your income is taxed at the same rate. If you are single and earn $70,000, you do not pay 8% on the entire amount. Instead, the first portion of your income is taxed at 1%, the next portion at 2%, and so on, until your last dollars are taxed at the highest rate that applies to you.

For 2024, a single filer's brackets start at 1% on the first $10,099 of taxable income, then jump to 2% on income between $10,099 and $23,942, then 4%, 6%, 8%, 9.3%, 10.3%, 11.3%, 12.3%, and finally 13.3% on income over $680,063. Married couples filing jointly have higher income thresholds before each rate kicks in. Head of household filers have their own brackets, as do married people filing separately.

The brackets shift upward each year. In 2025, those same ranges will be slightly higher to account for inflation. The Franchise Tax Board, California's tax authority, publishes the current brackets every January. If you file taxes yourself, you need the brackets for the year you are filing, not the current year.

What income is taxable in California

California taxes nearly all forms of income. Wages from an employer are taxable. Self-employment income is taxable. Interest from savings accounts and bonds is taxable. Dividends from stocks are taxable. Capital gains — the profit you make when you sell an investment for more than you paid — are taxable. Rental income is taxable. Retirement account withdrawals are taxable (with some exceptions for Roth accounts). Gambling winnings are taxable.

A few income sources are not taxed by California. Social Security benefits are generally not taxed, though there are income limits. Certain retirement account contributions — like traditional 401(k) contributions — reduce your taxable income. Some types of municipal bond interest are not taxed. Gifts and inheritances are not taxed. Workers' compensation and certain disability payments are not taxed.

If you are unsure whether a particular income source is taxable, the Franchise Tax Board website lists the rules, or you can consult a tax professional. The distinction matters because unreported income can trigger an audit or a penalty.

Deductions and credits that lower your bill

California allows you to reduce your taxable income using the standard deduction. For 2024, the standard deduction is $5,202 for a single filer, $10,404 for married couples filing jointly, and $7,803 for head of household filers. These amounts increase slightly each year. If your income is below the standard deduction, you may owe no California income tax at all.

You can also claim itemized deductions instead of the standard deduction if they add up to more. Itemized deductions include mortgage interest, property taxes (up to $10,000 combined with state income taxes under federal rules, though California allows the full amount), charitable donations, and medical expenses above a certain threshold. Most people benefit more from the standard deduction, but high-income earners with large expenses sometimes itemize.

California also offers tax credits, which reduce your tax bill dollar-for-dollar. The Earned Income Tax Credit (EITC) helps low-income workers. The Child and Dependent Care Credit covers childcare expenses. The Dependent Exemption Credit gives you a credit for each dependent. Unlike deductions, which reduce your taxable income, credits directly reduce the tax you owe, making them more valuable.

How to file California income tax

You file California income tax using Form 540 or Form 540-2EZ (the shorter form for simpler returns). The form is due by April 15 each year, the same important date as federal taxes. You can file by mail or electronically through the Franchise Tax Board's website or through tax software like TurboTax, H&R Block, or TaxAct, which all support California filing.

If your income is below a certain threshold — $73,586 for single filers in 2024 — you may be able to use the free CalFile system or free tax software through the IRS Free File program, which includes California. If you earn more than that threshold, you can still file for free using the same software, but you must pay a fee if you use a paid tax preparation service.

You will need your W-2 forms from employers, 1099 forms for self-employment or investment income, and records of any deductions or credits you claim. If you file late, you owe a penalty and interest on any unpaid tax. If you cannot file by April 15, you can request an extension, though an extension to file does not extend the important date to pay.

Who must file a California return

You must file a California return if your income exceeds the threshold for your filing status. For 2024, that threshold is $20,824 for a single filer, $41,648 for married couples filing jointly, and $31,236 for head of household filers. These thresholds are lower than the federal thresholds, so you may owe California tax even if you do not owe federal tax.

You must also file if you had California income tax withheld from your paychecks, even if your total income is below the threshold. Many people file to claim the Earned Income Tax Credit or other refundable credits, which can result in a refund even if you owe no tax. If you are a dependent on someone else's return, you may still need to file your own California return depending on your income.

Non-residents and part-year residents who earned income in California must also file, even if they live out of state. The rules are complex for people who moved during the year or worked in California while living elsewhere. The Franchise Tax Board has a worksheet to help you determine whether you must file.

Self-employment tax and estimated payments

If you are self-employed, you owe California income tax on your net profit (income minus business expenses). You also owe self-employment tax to cover Social Security and Medicare, which is a federal obligation, not a state one. Self-employment tax is roughly 15.3% of your net profit, though you can deduct half of it from your income.

Self-employed people and others with income not subject to withholding must make estimated tax payments four times a year — usually in April, June, September, and January. These payments are due on specific dates set by the Franchise Tax Board. If you do not pay enough throughout the year, you may owe a penalty when you file, even if you ultimately owe no tax.

You can calculate your estimated payment using Form 540-ES or through tax software. If your income varies throughout the year, you can adjust your payments quarterly. Many self-employed people work with a tax professional to may support they are paying the right amount and taking advantage of deductions like home office expenses, vehicle costs, and supplies.

Frequently Asked Questions

Do I have to pay California income tax if I live out of state but work in California?

Yes. California taxes income earned within the state, regardless of where you live. If you worked in California and lived in another state, you owe California tax on that income. You may also owe tax to your home state, depending on its rules. Some states have reciprocal agreements that prevent double taxation, but you will need to file in both places.

What happens if I do not file or pay my California taxes?

The Franchise Tax Board can assess penalties and interest on unpaid tax. Penalties start at 5% of the unpaid amount and increase if you do not respond. Interest accrues daily. If you owe a large amount, the state can place a lien on your property or garnish your wages. If you cannot pay in full, you can request a payment plan.

Can I deduct federal income tax from my California taxes?

No. California does not allow you to deduct federal income tax paid. However, you can deduct state income taxes paid on your federal return (up to $10,000 combined with property taxes under current federal rules). The two tax systems are separate.

Is retirement income taxed differently in California?

Most retirement income is taxed as ordinary income. Withdrawals from traditional IRAs and 401(k)s are fully taxable. Social Security is generally not taxed. Roth IRA withdrawals are not taxed if the account has been open for five years and you are over 59½. Military pensions have special rules. A tax professional can help you understand the tax treatment of your specific retirement income.

What if I made a mistake on my California tax return?

You can file an amended return using Form 540-X within four years of the original filing date. If you are owed a refund, file as soon as possible. If you owe additional tax, file promptly to minimize penalties and interest. The Franchise Tax Board will contact you if they discover an error during an audit, but it is better to correct it yourself.