California taxes capital gains as regular income, with rates from 1% to 13.3%
California does not have a separate capital gains tax. Instead, the state taxes money you make from selling investments—stocks, real estate, cryptocurrency, or other assets—as ordinary income. This means your capital gains are added to your other income and taxed at California's regular income tax rates, which range from 1% to 13.3% depending on how much total income you have.
The 13.3% rate is the highest in the country. It applies to single filers earning over $680,000 per year (as of 2024), married couples filing jointly earning over $1,360,000, and heads of household earning over $1,020,000. These income thresholds change slightly each year. If you earn less, your capital gains are taxed at a lower rate—but you still pay something unless your total income falls below the filing threshold.
This is different from the federal government, which taxes long-term capital gains (assets held over one year) at preferential rates of 0%, 15%, or 20%. California offers no such break. Whether you held an investment for one month or twenty years, California taxes the profit the same way.
Key Takeaways
- California taxes capital gains as regular income at rates from 1% to 13.3%, with no preferential rate for long-term holdings.
- Your capital gains are added to your wages, self-employment income, and other earnings to determine your total taxable income and tax bracket.
- The 13.3% top rate applies to high earners, but even modest capital gains can push you into a higher bracket if your other income is substantial.
- You report California capital gains on Form 540 (California resident return) or Form 540-NR (nonresident return) using the same gain or loss amount you report to the federal government.
How California calculates your capital gains tax
Start with the gain—the sale price minus what you paid for the asset, plus any improvements or deductions. If you bought a rental house for $400,000, spent $50,000 on repairs, and sold it for $600,000, your gain is $150,000. California taxes that $150,000 as income.
That $150,000 is added to your other income for the year. If you earned $80,000 in wages and had $150,000 in capital gains, California sees $230,000 in total income. Your tax rate is based on that $230,000 total, not just the wages. This is called income stacking, and it can push you into a higher tax bracket than you would have reached with wages alone.
If you have a capital loss—you sold something for less than you paid—you can use it to reduce your capital gains. If you had $150,000 in gains and $50,000 in losses, you report $100,000 in net gains. Unused losses can carry forward to future years, but there are limits on how much loss you can deduct against other income in a single year.
California's tax brackets for 2024
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 1% | $0–$10,099 | $0–$20,198 | $0–$14,348 |
| 2% | $10,099–$23,942 | $20,198–$47,884 | $14,348–$33,871 |
| 4% | $23,942–$37,788 | $47,884–$75,768 | $33,871–$53,359 |
| 6% | $37,788–$52,455 | $75,768–$104,910 | $53,359–$72,816 |
| 8% | $52,455–$66,295 | $104,910–$132,590 | $72,816–$91,165 |
| 9.3% | $66,295–$340,328 | $132,590–$680,656 | $91,165–$510,492 |
| 10.3% | $340,328–$408,393 | $680,656–$816,786 | $510,492–$612,589 |
| 11.3% | $408,393–$680,328 | $816,786–$1,360,656 | $612,589–$1,020,492 |
| 12.3% | $680,328–$680,000 | $1,360,656–$1,360,000 | $1,020,492–$1,020,000 |
| 13.3% | Over $680,000 | Over $1,360,000 | Over $1,020,000 |
These brackets adjust each year for inflation. The thresholds shown are for the 2024 tax year, which you report in 2025. Check the Franchise Tax Board website for current-year brackets if you are filing for a different year.
Remember: your capital gains are taxed at your marginal rate—the rate that applies to your highest dollar of income. If you are single with $100,000 in wages and $50,000 in capital gains, the capital gains are taxed at the 9.3% rate because that is the bracket your total income falls into, not the 6% rate that applies to your first $52,455.
Nonresidents and part-year residents
If you lived in California for only part of the year or are not a California resident, you still owe California tax on capital gains from selling California real estate or property located in the state. You report this on Form 540-NR (nonresident return).
For other assets—stocks, bonds, cryptocurrency—nonresidents generally do not owe California tax. The exception is if you were a California resident when you sold the asset or if the asset was connected to a California business. The rules are complex, and it is worth checking with a tax professional if you moved out of state or are not sure of your residency status.
Part-year residents (people who moved to or from California mid-year) must report all income earned while a resident on Form 540. Income earned before you moved to California or after you moved away is not subject to California tax, though you may owe tax to your new state.
Reporting capital gains on your California tax return
You report capital gains on Schedule D (California) or Schedule D-1 (California), which you attach to your Form 540. The gain or loss amount comes from your federal Schedule D—California uses the same calculation as the IRS. You do not calculate the gain differently for California.
List each sale separately: the asset name, date acquired, date sold, sale price, cost basis, and gain or loss. If you have many transactions, you can summarize them by category (long-term gains, long-term losses, short-term gains, short-term losses) rather than listing each one individually.
The Franchise Tax Board matches your California return against your federal return. If your federal Schedule D shows a gain but your California return does not report it, the FTB will likely send you a notice. If you made a mistake or forgot to report a gain, it is better to file an amended return (Form 540-X) than to wait for the FTB to catch it.
When you might owe less or nothing
If your total income is low enough, you may not owe California tax at all. The filing threshold for 2024 is $23,942 for single filers and $47,884 for married couples filing jointly. If your income (including capital gains) is below these amounts, you do not have to file a California return—though you may want to if you had taxes withheld and are due a refund.
If you have capital losses that exceed your capital gains, you can deduct up to $3,000 of the net loss against other income in a single year. Any loss beyond that carries forward to future years. This can reduce your taxable income and your tax bill, but it does not create a refund if you have no other income.
Certain types of gains are not taxed or are taxed differently. Gains from selling your primary residence may be excluded under federal law (up to $250,000 for single filers, $500,000 for married couples), and California follows the federal exclusion. Some inherited assets receive a "step-up" in basis, meaning you do not owe tax on gains that occurred before you inherited them. These rules are specific to your situation, and a tax professional can help you understand whether they explore.
Frequently Asked Questions
Do I owe California tax on capital gains if I moved out of state?
It depends on when you moved and what you sold. If you sold California real estate or property located in California, you owe California tax even if you are no longer a resident. If you sold stocks or other assets not tied to California, you generally do not owe California tax after you move, though you may owe tax to your new state. File Form 540-NR if you are unsure.
What is the difference between long-term and short-term capital gains in California?
California taxes both the same way—as ordinary income at your regular tax rate. The federal government taxes long-term gains (held over one year) at lower rates, but California does not. You still report long-term and short-term gains separately on your return because the federal tax is different, but California's tax is identical for both.
Can I deduct investment losses against my capital gains?
Yes. If you have capital losses, subtract them from your capital gains. If losses exceed gains, you can deduct up to $3,000 of the net loss against wages or other income in a single year. Any remaining loss carries forward to future years.
Do I owe California tax on cryptocurrency gains?
Yes. Selling cryptocurrency is treated as a capital gain. You owe California tax on the difference between what you paid and what you received, taxed as ordinary income at your regular rate. Trading one cryptocurrency for another is also a taxable event in California.
What if I inherited an investment that went up in value?
You generally do not owe tax on the gain that occurred before you inherited it. Your cost basis is "stepped up" to the value on the date of death, so you only owe tax on gains after that date. This is a federal rule that California follows, but the details depend on your specific situation.