California Tax Guide: What You’ll Pay in 2024
California has the nation’s highest individual income tax rates and high sales tax burdens compared to the rest of the country. In general, the state has low property tax rates for residents who have owned a home for a long time. Newer residents, or people who have moved, have a much higher property tax burden.
The state also has high income and sales taxes, as well as income tax applying to all retirement income except for Social Security.
The big picture:
- Income tax: 1 percent to 12.3 percent
California has nine tax brackets, ranging from 1 percent to 12.3 percent. Those who make over $1 million also pay an additional 1 percent income tax.
- Property tax: 0.75 percent of a home’s assessed value (average)
Real estate taxes vary across California, with an average tax rate of 0.75 percent of a home’s assessed value in 2021, according to the Tax Foundation.
- Sales tax: 8.85 percent (average combined state and local)
A state sales tax rate of 7.25 percent is levied on the sale of goods and services. But the addition of local sales taxes can have shoppers paying 10 percent or more in some cities.
How is income taxed in California?
The state’s nine tax brackets are below. The California Mental Health Services Act imposes an additional 1 percent tax on income over $1 million. Not all of your income is taxed at the same rate. For example, if you’re a single filer and your taxable income is $80,000, the first $10,412 would be taxed at 1 percent, the next $10,412 to $24,684 would be taxed at 2 percent and so on.
Single filers:
Source: California Franchise Tax Board
Joint filers:
Source: California Franchise Tax Board
*Taxable income: Gross income (wages, tips, bonuses, etc.) after subtracting for itemized or standard deductions
Part-year residents pay taxes on all income received while they are a California resident, as well as on income from California sources while they are a nonresident.
Nonresidents pay taxes on income from California sources.
Watch the video below to learn how to identify your 2023 federal income tax brackets.
Are pensions or retirement income taxed in California?
Yes. Money withdrawn from pensions and 401(k)s, 403(b)s and IRAs is combined and taxed as regular income. Tax rates run from 1 percent to 13.3 percent, just like for other income.Government pensions, private pensions and military retirement income are also all taxed as above.
AARP’s retirement calculator can help you determine if you are saving enough to retire when — and how — you want.
What about investment income?
Capital gains from investments are treated as ordinary personal income and taxed at the same rate. Gains from the sale of one’s home that are less than $250,000 are not taxable. Home sale gains greater than $250,000 are taxable.
Does California tax Social Security benefits?
No, Social Security income is not taxed by the state of California. But you may pay federal taxes on a portion of your Social Security benefits, depending on your income. Up to 50 percent of your benefits will be taxed if you file an individual tax return and make between $25,000 and $34,000 in total income — or if you file jointly and as a household make $32,000 to $44,000 in total income. And up to 85 percent of your benefits will be taxed by the federal government if your total income is more than $34,000 individually or $44,000 as a household.AARP’s Social Security calculator can assist you in determining when to claim and how to maximize your Social Security benefits.
How is property taxed in California?
Across California’s 58 counties, property tax is assessed by individual county assessors. As part of Proposition 13 — which limits the property tax rate to 1 percent of the property’s full cash value plus the rate necessary to fund local voter-approved bonded indebtedness — property assessments are only done when there is a change of ownership or after new construction.
New construction may be excluded from reassessment if modifications made an existing structure more accessible for a physically disabled person.
California has a number of property tax exemptions, including a homeowners’ exemption and disabled veterans’ exemption. The state also offers a Property Tax Postponement Program for those 62 and older.
If you are 55 or older, you may be able to transfer the taxable value of your principal residence when you sell your home and buy or build another one, which can result in a significant tax savings. Additionally, Proposition 19 may allow you to save on property taxes by transferring your home to a child or grandchild without having it reassessed. Learn more about property transfer savings.
Learn how your property is assessed — and even contest it.
What about sales tax and other taxes?
- Sales tax: There’s a 7.25 percent statewide sales and use tax on most consumer goods, such as furniture, toys and clothing. But some areas have multiple local taxes, known as district taxes, that can raise the sales tax to as much as 10.75 percent. California’s combined state and average local tax rate is 8.85 percent, the eighth highest in the country, according to the Tax Foundation. Find your local tax rate, or view all city and county sales and use tax rates.
- Exemptions: A list of items exempt from sales tax can be found in the California Department of Tax and Fee Administration’s Sales and Use Taxes: Tax Expenditures publication.
- Groceries: Many groceries, such as produce, baby formula and noncarbonated sports drinks, are tax-exempt; however, hot prepared food, soaps, detergents and alcoholic drinks sold in a grocery store are subject to the locality’s sales and use tax. Learn more.
- Gas and diesel: As of February 2024, gas at the pump was subject to a 2.25 percent sales and use tax (plus applicable district taxes) and an excise tax of .579 cents a gallon, both included in the retail price. Diesel fuel is subject to a 13 percent sales and use tax (plus applicable district taxes) and an excise tax of .441 cents a gallon, both included in the price at the pump. Gasoline is exempt from the state portion of the sales tax. Learn more.
- Alcohol: Beer, wine and sparkling hard cider are all taxed at 20 cents per gallon. Liquor is taxed $3.30 to $6.60 per gallon, depending on the percentage of alcohol, and champagne and sparkling wine are subject to a 30 cents per gallon tax. These taxes are paid by the manufacturer but some or all may be included in the retail price. Alcohol is also subject to state and local sales tax.
- Lottery: There’s no state or local tax on lottery winnings, but you’ll still owe federal income tax on your prize money. Find more information on the California Franchise Tax Board and California Lottery websites.
Will I or my heirs have to pay inheritance and estate tax in California?
If you received a gift or inheritance, it should not be included in your income. But if the gift or inheritance later produces income, you will need to pay taxes on that income.
California does not have an estate tax; however, an estate is subject to income taxes. Learn more.
Are there any tax breaks for older California residents?
California seniors can claim an additional exemption credit on their state income taxes if they are 65 or older by Dec. 31, 2023. If married and both spouses are 65 or older, each spouse can claim the credit.
The state also offers a Senior Head of Household Credit for those 65 or older who qualify and a Property Tax Postponement Program for those 62 and older.
Are military benefits taxed in California?
California taxes the military retirement income of residents. Active-duty pay is taxed like normal income if you are a resident of the state. If you lived in California when you entered the military but are stationed outside of the state, you are considered a nonresident and will only be taxed on California-sourced income, such as California sales, rental property and nonmilitary wages.
Military spouses may be eligible for certain tax benefits under the Military Spouses Residency Relief Act, including income tax exemption and an option to use the same state of residency as the service member.
What is the deadline for filing California state taxes in 2024?
The deadline to file a California state tax return is April 15, 2024, which is also the deadline for federal tax returns. For help estimating your annual income taxes, use AARP’s tax calculator.
California grants an automatic six-month extension (until Oct. 15, 2024) to file your tax return; however, payments are still due by April 15, 2024. No application is required for an extension to file. Learn more.
Michelle Cerulli McAdams is a freelance writer based in Massachusetts. She has written for the AARP Bulletin for 10 years, covering health, medicine, politics and policy.
