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

California taxes the income of residents and non-residents who earn money in the state. The tax rate ranges from 1% to 13.3%, depending on how much you earn. Unlike some states that have a flat tax rate, California uses a progressive tax system, meaning higher earners pay a higher percentage of their income in taxes.

The state also taxes capital gains, interest, dividends, and other forms of income. If you live in California for more than nine months of the year, you are considered a resident for tax purposes and must report all income, regardless of where you earned it. Non-residents report only income earned within California.

California's top tax rate of 13.3% applies to the highest earners and includes a 1% Mental Health Tax that was added in 2012 on income over $1 million. This makes California's combined state and federal tax burden one of the largest in the nation for high-income residents.

Key Takeaways

  • California's income tax rates range from 1% to 13.3%, with higher earners paying a larger percentage of their income.
  • The state taxes residents on all income earned anywhere, and non-residents only on income earned within California.
  • You are considered a California resident for tax purposes if you live in the state for more than nine months in a tax year.
  • California taxes wages, self-employment income, capital gains, interest, and dividends at the same progressive rates.
  • The top rate includes a 1% Mental Health Tax that applies to income over $1 million.

How California's tax brackets work

California divides income into brackets, and you pay the rate for each bracket only on the income that falls within it. For example, if you are single and earn $50,000, you do not pay 9.3% on all of it — you pay 1% on the first portion, then 2% on the next portion, and so on, up to the bracket your $50,000 falls into.

The state updates its tax brackets each year to account for inflation. The 2024 brackets for single filers start at 1% on income up to $10,099, then move through 2%, 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 bracket thresholds at each level, and head-of-household filers have their own set of brackets.

The brackets change annually, so the income thresholds that trigger each rate are different from year to year. You can find the current brackets on the California Franchise Tax Board website, which is the state agency that collects income tax.

Who must file a California tax return

You must file a California return if you are a resident with income above a certain threshold, even if you do not owe tax. For 2024, single residents must file if they have gross income of $21,600 or more. The threshold is higher for married couples filing jointly, head-of-household filers, and dependents, and it varies based on age and filing status.

Non-residents must file if they earned income in California above the filing threshold. Part-year residents — people who moved into or out of California during the year — must also file if their income meets the threshold.

Even if your income is below the threshold, you may want to file to claim a refund if taxes were withheld from your paychecks or if you are may have access to to credits like the Earned Income Tax Credit.

Deductions and credits available in California

California allows you to deduct certain expenses from your income before calculating tax. The state offers a standard deduction — a set amount you can deduct based on your filing status — or you can itemize deductions if they total more than the standard amount. For 2024, the standard deduction for single filers is $5,202, and for married couples filing jointly it is $10,404.

The state also offers tax credits that reduce the amount of tax you owe. The California Earned Income Tax Credit provides money back to low- and moderate-income workers. Other credits include the Child and Dependent Care Expenses Credit, the Renter's Credit, and credits for education expenses. Unlike deductions, which reduce your income, credits directly reduce your tax bill dollar-for-dollar.

California does not allow deductions for state and local taxes paid, federal income taxes, or mortgage interest — those are federal deductions only. However, the state does allow deductions for contributions to certain retirement accounts, such as traditional IRAs and SEP-IRAs, which can lower your California taxable income.

How income tax withholding works in California

If you are an employee, your employer withholds California income tax from each paycheck based on the information you provide on Form W-4. The amount withheld depends on your filing status, the number of dependents you claim, and any additional withholding you request. If too much is withheld, you receive a refund when you file your return. If too little is withheld, you owe tax when you file.

Self-employed people and those with income not subject to withholding must make estimated tax payments four times per year — usually in April, June, September, and January. These payments are due on specific dates set by the Franchise Tax Board, and missing a payment can result in penalties and interest.

You can adjust your withholding at any time by submitting a new Form W-4 to your employer. If you expect a large refund or to owe a large amount, changing your withholding mid-year can help you avoid either situation.

When California taxes are due

California income tax returns are due on the same date as federal returns, which is typically April 15 of the year following the tax year. If April 15 falls on a weekend or holiday, the important date moves to the next business day. You can request an extension to file, which gives you until October 15, but taxes owed are still due by April 15 — an extension only extends the filing important date, not the payment important date.

Estimated tax payments for self-employed people and others are due on April 15, June 15, September 15, and January 15 of the following year. If you miss a payment, the Franchise Tax Board charges penalties and interest on the unpaid amount.

If you file your return and owe tax, you can pay online through the Franchise Tax Board website, by mail, or through an authorized payment processor. Paying by the important date avoids penalties, even if you cannot pay the full amount — you can set up a payment plan for any remaining balance.

Special situations: part-year residents and non-residents

If you moved to California during the year, you are a part-year resident and must report only the income you earned while living in the state. You report income earned before you moved on your previous state's return. The same applies if you moved out of California — you report only income earned while you were a resident.

Non-residents who worked in California or earned California-source income must file a California return reporting only that income. This includes people who worked remotely for a California company while living elsewhere, people who sold property in California, and people who received income from California rental properties or businesses.

Military members stationed in California are not considered California residents for tax purposes, even if they live there. They report income to their home state instead. However, spouses and dependents of military members may be treated differently, so it is worth checking the Franchise Tax Board rules if this applies to you.

Frequently Asked Questions

Does California tax retirement income differently?

California taxes most retirement income at the same rates as other income. However, the state excludes military pensions and some federal pensions from taxation. Social Security benefits are not taxed by California. Withdrawals from traditional IRAs, 401(k)s, and similar accounts are taxed as ordinary income at your regular rate.

What happens if I do not file a California tax return?

The Franchise Tax Board can assess penalties and interest on unpaid taxes, and the state can place a lien on your property or garnish your wages. If you owe a large amount, the state may also suspend your driver's license. Filing late is better than not filing at all, and you can work with the Franchise Tax Board to set up a payment plan if you cannot pay in full.

Can I deduct federal taxes paid from my California income?

No. California does not allow deductions for federal income taxes, state income taxes, or local taxes paid. You can only deduct these on your federal return if you itemize deductions there. California does allow deductions for contributions to certain retirement accounts and some education-related expenses.

Do I owe California tax if I work remotely for an out-of-state company?

If you are a California resident, you owe California tax on all income, including income from remote work for an out-of-state employer. The location of your employer does not matter — what matters is where you live and where you earned the income. If you are a non-resident who worked remotely for a California company, you generally do not owe California tax on that income.

What is the Mental Health Tax?

The Mental Health Tax is a 1% additional tax on income over $1 million that was added to California's tax code in 2012. It applies to all income types — wages, capital gains, business income, and others — for both residents and non-residents. This tax is separate from the regular income tax brackets and is in addition to the 12.3% top rate, bringing the total top rate to 13.3%.