Yes, California has a state income tax, and it is one of the highest in the country

California taxes your income at rates that range from 1% to 13.3%, depending on how much you earn. Unlike some states that have no income tax at all, California applies these rates to wages, self-employment income, investment gains, and other earnings. The tax brackets change each year, and the highest rate kicks in at different income levels for single filers versus married couples filing jointly.

The state also taxes capital gains — the profit you make when you sell an investment or property — at the same rates as ordinary income. This is different from the federal system, where long-term capital gains often get preferential rates. If you live in California for any part of the year, you owe state tax on income you earned while you were here, even if you moved away later.

Key Takeaways

  • California's income tax rates range from 1% to 13.3%, with the highest rate explore to income over roughly $680,000 for single filers in 2024.
  • You pay state tax on wages, self-employment income, rental income, and investment gains if you live in California or earned the income while living there.
  • The state taxes long-term capital gains at the same rates as regular income, unlike the federal government.
  • You file your California state return using Form 540 or a shorter form if your income is below a certain threshold.
  • If you move out of California, you may still owe tax on income earned before you left, and you should file a part-year return.

How California income tax brackets work

California uses a progressive tax system, meaning the rate increases as your income goes up. You do not pay the top rate on all your income — you pay the lower rates on the lower portions first. For example, in 2024, a single filer pays 1% on the first $10,099 of taxable income, then 2% on income between $10,099 and $23,942, and so on up the bracket ladder.

The brackets shift upward each year to account for inflation, so the income thresholds where each rate begins are different in 2024 than they were in 2023. The Franchise Tax Board, which administers California taxes, publishes the current brackets on its website each January. If you are married filing jointly, your brackets are wider — you can earn more before hitting each rate — but the top rate of 13.3% still applies once you cross into the highest bracket.

What income is taxed in California

California taxes almost all types of income: wages from a job, tips, self-employment income, rental income, interest, dividends, and capital gains. If you own a business or are a freelancer, you owe tax on your net profit after deducting business expenses. If you rent out a property, you owe tax on the rent minus allowable deductions like mortgage interest and repairs.

Some income is exempt. Social Security benefits are not taxed by California, even though they may be taxed federally. Certain disability payments and workers' compensation are also exempt. If you receive a settlement for a personal injury lawsuit, that money is generally not taxed. However, if you win a lawsuit and receive damages for lost wages, the lost wages portion is taxable.

Filing requirements and important date

You must file a California state return if your income exceeds a threshold that changes each year. For 2023 returns filed in 2024, the threshold was roughly $20,000 for most single filers, though it is higher if you are over 65 or blind. If your income is below the threshold, you do not have to file, but you may want to anyway if taxes were withheld from your paychecks — filing gets you a refund.

The important date to file is the same as the federal important date: April 15 of the following year, or the next business day if April 15 falls on a weekend or holiday. If you cannot file by then, you can request an extension, which gives you until October 15. An extension delays your filing important date but does not delay your tax payment important date — if you owe money, it is due by April 15 regardless.

You file using Form 540 (the full return) or Form 540-2EZ (a shorter form for straightforward situations). The Franchise Tax Board provides these forms and instructions on its website, and you can file by mail or electronically through approved software or tax preparers.

Tax withholding and estimated payments

If you work as an employee, your employer withholds California income tax from your paycheck based on a form you fill out — similar to the federal W-4. The amount withheld depends on your filing status, the number of dependents you claim, and other adjustments. If too much is withheld, you get 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 make quarterly estimated tax payments. These are due on April 15, June 15, September 15, and January 15 of the following year. If you do not pay enough throughout the year, you may owe a penalty when you file, even if you ultimately do not owe any tax.

What happens if you move out of California

If you move out of California during the year, you owe state tax only on income you earned while you lived there. You file a part-year return, which is still Form 540 but with a notation that you were a resident for only part of the year. You need to report the dates you moved and provide documentation — a lease, utility bill, or employment letter showing when you left.

The tricky part is determining your residency status. California considers you a resident if you are physically present in the state for more than nine months in a year, or if you have a permanent home there and spend any significant time there. If you move to another state but still own a home in California, the state may argue you are still a resident. If you dispute this, you may need to provide evidence like a new lease, job offer, or utility bills in the new state.

Deductions and credits available to California taxpayers

California allows you to claim either the standard deduction or itemized deductions, just like the federal return. The standard deduction for 2024 is roughly $4,783 for single filers and $9,566 for married couples filing jointly, though these amounts increase if you are 65 or older. If you itemize, you can deduct mortgage interest, property taxes, charitable donations, and other expenses, but California limits the property tax deduction to $10,000 per year.

California also offers tax credits for certain situations. The Earned Income Tax Credit (EITC) is available to low-income workers, and California's version is often more generous than the federal credit. If you have dependent children, you may may have access to for the Child and Dependent Care Credit. Renters can claim a Renter's Credit if their income is below a certain level. These credits reduce your tax dollar-for-dollar, making them more valuable than deductions.

Frequently Asked Questions

Do I have to pay California state tax if I work remotely for a company outside California?

Yes, if you live in California and work remotely, you owe California tax on your wages. Your employer should be withholding California tax from your paycheck. If your employer is out of state and is not withholding, you are responsible for paying through estimated quarterly payments or by having extra withheld from your paycheck.

What is the 13.3% tax rate in California and who pays it?

The 13.3% rate is California's top marginal rate, and it applies to the highest portion of your income once you cross into the top bracket. For 2024, single filers hit this rate on income over roughly $680,000. This rate was increased in 2012 and applies to high earners; most California taxpayers pay rates between 1% and 9.3%.

Can I deduct federal taxes paid from my California return?

No, California does not allow you to deduct federal income taxes paid. You can deduct state and local taxes (SALT) on your federal return, but only up to $10,000 per year. California taxes are separate from federal taxes, and each system has its own rules about what you can deduct.

What if I did not file a California return in previous years?

You should file back returns as soon as possible. If you owed tax and did not file, penalties and interest accumulate over time. The Franchise Tax Board has a statute of limitations — generally four years — but filing sooner reduces the amount you owe. You can file amended returns for prior years using Form 540-X.

Do I owe California tax on income from investments or rental property if I do not live there anymore?

No, once you move out of California and establish residency elsewhere, you do not owe California tax on new income. However, if you still own rental property or investments in California, you owe tax on the income those generate while you own them. You file as a nonresident and report only California-source income on your return.