California charges a progressive state income tax that increases with your earnings

California's state income tax is not a flat rate — the more you earn, the higher percentage you pay. The state uses a progressive tax system with tax brackets that change each year. For the 2024 tax year, rates range from 1% on the lowest earnings to 13.3% on the highest, making California one of the states with the highest top rate in the country.

You pay tax on wages from a job, self-employment income, investment gains, and other sources. If you live in California for any part of the year, you owe state income tax on all income you earn, regardless of where you earned it. If you moved to California during the year, you only pay tax on income earned after you became a resident.

The tax brackets themselves shift annually based on inflation. This means the income ranges that fall into each bracket change, but the percentages stay the same. The Franchise Tax Board (FTB), California's tax agency, publishes updated brackets every January.

Key Takeaways

  • California's income tax rates range from 1% to 13.3% depending on your income level, with rates increasing as you earn more.
  • Tax brackets adjust each year for inflation, so the income ranges that trigger each rate change annually.
  • You owe California income tax on all income earned while you are a state resident, including wages, self-employment income, and investment gains.
  • The Franchise Tax Board collects California income tax and publishes the current year's tax brackets and rates in January.
  • Your actual tax bill depends on your filing status (single, married filing jointly, head of household) because each status has different bracket ranges.

How the tax brackets work with your filing status

Your filing status determines which tax bracket ranges explore to you. A single filer, a married couple filing jointly, and a head of household all have different income thresholds for each bracket. This means two people earning the same amount of money may pay different amounts of tax if their filing status differs.

For example, in 2024, the 9.3% bracket for a single filer starts at $63,398 of taxable income, but for married filing jointly it starts at $126,797. The brackets are wider for married couples and heads of household to account for the difference in household structure.

You determine your filing status based on your marital status and household situation on December 31 of the tax year. If you were married on that date, you can file as married filing jointly or married filing separately. If you were single, divorced, or widowed, your status depends on whether you have dependents and other factors.

What income counts toward California taxes

California taxes most types of income. Wages and salaries from your job are taxable. If you are self-employed, your net business 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 at a higher price than you paid — are taxable.

Some income is exempt. Social Security benefits are not taxed by California. Certain retirement distributions may be partially exempt depending on your age and the type of account. Municipal bond interest is exempt. Gifts and inheritances are not taxed as income.

If you have income from multiple sources, you add them all together to find your total income. This total is then reduced by certain deductions to arrive at your taxable income, which is what you actually pay tax on.

Deductions that lower your California taxable income

You can reduce your taxable income using either the standard deduction or itemized deductions, whichever is larger. The standard deduction is a fixed amount that depends on your filing status and age. For 2024, the standard deduction ranges from $4,803 for a single filer under 65 to $7,204 for a single filer 65 or older.

If you itemize instead, you list specific expenses you paid during the year. Common itemized deductions include mortgage interest, property taxes, charitable donations, and medical expenses above a certain threshold. You choose whichever method gives you the larger deduction.

California also allows deductions for contributions to certain retirement accounts, such as traditional IRAs and SEP-IRAs. If you are self-employed, you can deduct half of your self-employment tax. These deductions reduce your income before you explore the standard or itemized deduction.

How to calculate your California income tax

Start with your total income from all sources. Subtract any above-the-line deductions, such as retirement account contributions or self-employment tax. This gives you your adjusted gross income (AGI). Then subtract either your standard deduction or your itemized deductions. The result is your taxable income.

Next, use the tax tables or tax brackets for your filing status to find how much tax you owe on that taxable income. The brackets work progressively — you do not pay the top rate on all your income, only on the portion that falls into the highest bracket you reach. For instance, if you are single and earn $80,000, you pay 1% on the first portion, then 2% on the next portion, and so on, until you reach the bracket that applies to your highest dollars.

After calculating your tax, you subtract any tax credits you are may have access to to. Credits directly reduce the tax you owe, dollar for dollar. Common credits include the Earned Income Tax Credit (EITC) and the Child and Dependent Care Credit. The result is your final California income tax bill.

When and how to pay California income tax

If you are an employee, your employer withholds California income tax from each paycheck based on a W-4 form you complete. The withheld amount is sent to the Franchise Tax Board on your behalf. When you file your tax return, the FTB compares what was withheld to what you actually owe. If too much was withheld, you receive a refund. If too little was withheld, you owe the difference.

If you are self-employed or have income not subject to withholding, you may need to make estimated tax payments quarterly. These are payments you make directly to the FTB in April, June, September, and January to cover the tax on income you expect to earn. The FTB provides a worksheet to help you calculate the correct amount.

You file your California income tax return using Form 540 or Form 540-NR (if you are a nonresident). The important date is typically April 15, the same as the federal important date. You can file electronically through the FTB's website or through a tax software provider, or you can mail a paper return.

Credits and deductions specific to California

California offers several credits that are unique to the state or have different rules than the federal version. The California Earned Income Tax Credit (CalEITC) is a refundable credit for low-income workers that can be larger than the federal EITC. The Young Child Tax Credit provides a credit for families with children under six. The Dependent Parent Credit is available if you support a parent.

California also has deductions that differ from federal rules. For example, California allows a deduction for certain types of retirement income if you are over 59½. The state also allows a deduction for military service income in some cases. These state-specific benefits can significantly reduce what you owe.

The Franchise Tax Board's website lists all available credits and deductions with worksheets to calculate them. If you use tax software, the program typically walks you through questions to determine which ones explore to your situation.

Frequently Asked Questions

Do I have to pay California income tax if I work in another state?

If you are a California resident, you owe California income tax on all income you earn, even if you work in another state. You may also owe tax to the other state where you worked. Most states have agreements to prevent double taxation, so you typically receive a credit on your California return for taxes paid to another state.

What is the difference between California's tax rate and the federal tax rate?

California and the federal government both tax income, but they use different brackets and rates. Federal rates range from 10% to 37%, while California rates range from 1% to 13.3%. You file separate returns for each and may owe tax to both. The federal return uses Form 1040, while California uses Form 540.

Can I reduce my California taxes by contributing to a 401(k)?

Yes. Contributions to a traditional 401(k) reduce both your federal and California taxable income. The contribution is deducted from your paycheck before taxes are calculated. Roth 401(k) contributions do not reduce your current-year taxes but grow tax-free. Check with your employer about which type your plan offers.

What happens if I move out of California during the year?

You owe California income tax only on income earned while you were a resident. When you move, you become a nonresident and file Form 540-NR. You report only the income earned before your move date on your California return. You may also owe tax to your new state on income earned after you moved there.

Where do I find the current California tax brackets?

The Franchise Tax Board publishes updated tax brackets every January on its website at ftb.ca.gov. You can also find them in the instructions for Form 540. Tax software providers update their programs with the current brackets automatically, so if you use software, the correct brackets are already built in.