California does not tax Social Security benefits

California is one of the states that does not tax Social Security income at the state level. If you receive Social Security retirement, disability, or survivor benefits, you will not owe California state income tax on those payments. This applies whether you are retired, disabled, or receiving benefits as a family member of a worker who has died.

However, the federal government may tax your Social Security benefits depending on your total income for the year. California's exemption covers only state taxes, not federal ones. Understanding the difference between state and federal taxation is important because you may still have a federal tax obligation even though California leaves your benefits untouched.

Key Takeaways

  • California does not tax Social Security retirement, disability, or survivor benefits at the state level, regardless of how much you receive.
  • The federal government may tax up to 85 percent of your Social Security benefits if your combined income exceeds certain thresholds, which vary by filing status.
  • Combined income includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits—not just your benefits alone.
  • You can request that the Social Security Administration withhold federal taxes from your monthly benefit payment to avoid owing a large amount at tax time.
  • If you work while receiving Social Security before full retirement age, your benefits may be reduced, but California will still not tax the amount you receive.

How the federal government taxes Social Security

The federal tax treatment of Social Security depends on your combined income, which is calculated differently than your regular income. Combined income equals your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. The IRS uses this combined income figure to determine whether any of your benefits are taxable.

If you file as single and your combined income is between $25,000 and $34,000, you may owe federal tax on up to 50 percent of your benefits. If your combined income exceeds $34,000, you may owe tax on up to 85 percent of your benefits. The thresholds are higher for married couples filing jointly—$32,000 to $44,000 for the 50 percent bracket, and above $44,000 for the 85 percent bracket. Married couples filing separately face much lower thresholds and should consult a tax professional.

These thresholds have not changed since 1984 and 1993 respectively, so they affect more people each year as incomes rise. If your only income is Social Security and it falls below these thresholds, you will owe no federal tax on your benefits.

Income sources that count toward the federal threshold

When calculating whether your Social Security is taxable at the federal level, the IRS includes income from many sources beyond just your benefits. Wages from employment, self-employment income, pensions, interest, dividends, rental income, and capital gains all count toward your combined income. Even income from a part-time job or a small business you run in retirement pushes you closer to the taxable threshold.

Nontaxable interest—such as interest from municipal bonds—also counts in the combined income calculation, even though it is not taxable itself. This is a common surprise for retirees who thought certain income was "off the books." If you have a spouse who files separately, their income does not count toward your threshold, but married couples filing jointly must add both spouses' income together.

Withholding federal taxes from your Social Security check

You can ask the Social Security Administration to withhold federal income tax from your monthly benefit payment. This is useful if you know your benefits will be partially taxable and you want to avoid a large tax bill in April. You do this by completing Form W-4V (Voluntary Withholding Request) and submitting it to your local Social Security office or mailing it to the address on the form.

You can choose to withhold 7 percent, 10 percent, 12 percent, or 22 percent of your monthly benefit, or you can request a specific dollar amount. Once you request withholding, it stays in place until you change it. If your income situation changes—for example, you stop working or receive a large capital gain—you should update your withholding request to match your new tax situation.

Withholding is voluntary and optional. Some people prefer to pay estimated taxes quarterly instead, or to handle the tax bill when they file their return. There is no penalty for not withholding, but withholding can help you avoid underpayment penalties if your total tax liability is high.

Working while receiving Social Security before full retirement age

If you receive Social Security before reaching your full retirement age and you work, your benefits may be reduced. In 2024, Social Security reduces your benefit by $1 for every $2 you earn above $23,400 (the earnings limit changes each year). However, California does not tax the reduced benefit amount you actually receive—only the amount you get after the reduction.

The earnings limit applies only in the year you reach full retirement age and only to earnings before the month you reach that age. Once you reach full retirement age, you can earn any amount without losing benefits. The reduction in your benefit payment is a Social Security rule, not a tax, but it is worth understanding because it affects how much money you actually take home each month.

Reporting Social Security on your California tax return

You do not need to report your Social Security benefits on your California state income tax return because California does not tax them. If you file a federal return, you will report your benefits on Form 1040 and possibly Form 8949 or Schedule D if any of your benefits are taxable. Your Social Security statement (Form SSA-1099) shows the total benefits you received during the year.

Even though you do not owe California tax on your benefits, you may still need to file a California return if your other income exceeds the filing threshold for your age and filing status. California's filing thresholds are lower than the federal thresholds, so you might owe federal tax on your benefits but still not be required to file a California return. Check the current California Franchise Tax Board filing requirements for your situation.

Other California tax benefits for retirees and seniors

Beyond the Social Security exemption, California offers other tax breaks for people over 65 or receiving certain types of retirement income. If you receive a pension from a California public employee retirement system (CalPERS or CalSTRS), you may be able to exclude part of that income from California taxes. Military pensions are also exempt from California state income tax.

Retirement account withdrawals from traditional IRAs and 401(k)s are taxable in California, unlike Social Security. However, if you are over 65, you may be able to claim a larger standard deduction on your California return. The Franchise Tax Board website lists all available deductions and credits for seniors, and a tax professional can help you understand which ones explore to your situation.

Frequently Asked Questions

Will I owe California taxes if I move to California after receiving Social Security in another state?

No. California does not tax Social Security income regardless of where you received it or where you lived when you started receiving benefits. If you move to California as a retiree, your Social Security benefits remain untaxed by the state. You may owe federal tax on your benefits depending on your combined income, but that is a federal rule, not a California one.

What if I receive both Social Security and a pension—does California tax the pension?

California does not tax Social Security, but it does tax most pension income. Military pensions and some public employee pensions (CalPERS, CalSTRS) have exemptions, but private pension income and most other retirement account withdrawals are taxable in California. Your pension and Social Security are treated separately for tax purposes.

Do I have to file a federal tax return if my only income is Social Security below the threshold?

If your only income is Social Security and your combined income is below the federal threshold, you do not have to file a federal return. However, you may want to file anyway if you had federal taxes withheld from your benefits or if you are owed a refund from other sources. Check the IRS filing requirements for your age and filing status.

Can I reduce my federal tax on Social Security by moving to California?

Moving to California will not reduce your federal tax on Social Security because the federal government taxes your benefits regardless of which state you live in. However, if you currently live in a state that taxes Social Security, moving to California would eliminate that state tax. California's exemption applies to all residents receiving Social Security, not just those who were born there.

What happens if I did not withhold taxes and owe federal tax on my Social Security?

If you owe federal tax on your Social Security benefits and did not have taxes withheld, you will owe the amount when you file your federal return. You may also owe an underpayment penalty if your total tax liability is high. You can adjust your withholding going forward using Form W-4V, or you can make estimated tax payments quarterly to avoid penalties in future years.