Tax in California: a complete guide
This guide breaks down California’s tax obligations, including nine income tax brackets and property tax details.
California is a high-tax state compared to its neighbors in Oregon and Nevada.
The cost of living will be an essential consideration as you determine whether packing up and heading off to the Golden State is right for you. Some of the steepest sales, gas, and income tax rates countrywide apply in California.
Yes, life in the state comes with many beautiful benefits. But proper financial research is necessary whether you’re hoping to relocate for retirement or your next working chapter.
California income tax
As you’re probably already aware, if you’re a taxpaying US citizen, federal tax laws apply to you regardless of the state you choose to call home, and following tax law is essential. There are seven different federal income tax brackets as of 2023, which primarily dictate how much you’ll owe each tax year.
Additionally, California charges state income tax up to 12.3 percent. There are nine different income brackets:
1. A single person OR a married person/registered domestic partner filing separately
| Income | State income tax amount |
|---|---|
| $0-$10,999 | One percent of your income |
| $11,000-$23,942 | $100.99, and two percent over $10,099 |
| $23,943-$37,788 | $377.85, and four percent over $23,942 |
| $37,789-$52,455 | $931.69, and six percent over $37,788 |
| $52,456-$66,295 | $1,811.71, and eight percent over $52,455 |
| $66,296-$338,639 | $2,918, and 9.3 percent over $66,295 |
| $338,640-$406,364 | $28,246.90, and 10.3 percent over $338,639 |
| $406,365-$677,275 | $35,228.58, and 11.3 percent over $406,364 |
| $677,276 upwards | $65,835.52, and 12.3 percent over $677,275 |
2. A married person/registered domestic partner filing jointly OR a qualifying widower
| Income | State income tax amount |
|---|---|
| $0 to $20,198 | One percent of your income |
| $20,199-£47,884 | $201.98, and two percent over $20,198 |
| $47,885-$75,576 | $755.70, and four percent over $47,884 |
| $75,577-$104,910 | $1,862.38, and six percent over $75,576 |
| $104,911-$132,590 | $3,623.42, and eight percent over $104,910 |
| $132,591-$677,278 | $5,837.82, and 9.3 percent over $132,1590 |
| $677,279-$812,728 | $56,493.80, and 10.3 percent over $677,278 |
| $812,729-$1,354,550 | $70,445.15, and 11.3 percent over $812,728 |
| $1,354,551 upwards | $131,671.04, and 12.3 percent over $1,354,550 |
2. A married person/registered domestic partner filing jointly OR a qualifying widower
| Income | State income tax amount |
|---|---|
| $0 to $20,212 | One percent of your income |
| $20,213-$47,887 | $202.12, and two percent over $20,212 |
| $47,888-$61,730 | $755.62, and four percent over $47,887 |
| $61,731-$76,397 | $1,309.34, and six percent over $61,730 |
| $76,398-$90,240 | $2,189.36, and eight percent over $76,397 |
| $90,241-$460,547 | $3,296.80, and 9.3 percent over $90,240 |
| $460,548-$552,658 | $37,735.35, and 10.3 percent over $460,547 |
| $552,659-$921,095 | $47,222.78, and 11.3 percent over $552,658 |
| $921,096 upwards | $88,856.16, and 12.3 percent over $921,095 |
Corporate income tax is charged at a flat rate of 8.84 percent for corporations that report a net profit. Corporations that didn’t profit can instead pay the alternative minimum tax of 6.65 percent (also a flat rate).
California sales tax
Statewide sales tax in California is 7.25 percent, constructed of a six percent base rate and a mandatory local rate of 1.25 percent that funds city and county tax officials. District sales taxes between 0.1 percent and one percent increase this percentage figure, especially in places where multiple district sales taxes apply, meaning some California residents will pay a total of 10.25 percent in sales tax.
So, what exactly is taxed? Most purchases will apply this rate, with exemptions for groceries, prescription drugs, plants/seeds for food, and livestock.
Alcohol is not tax-exempt, and several selective sales taxes at different rates exist for these products. For instance:
The California Beer Tax is $0.20 per gallon.
The California Liquor Tax is $3.30 per gallon.
The California Wine Tax is $0.20 per gallon.
California property tax
If you’re planning to buy a home in California, you’ll need to have a clear awareness of property tax and the ability to account for it. Surprisingly, for the reputation the Golden State has garnered as one of the worst states to retire to in terms of value for money, home, and property owners in this state pay below the US average in property taxes.
California collects a general property tax of one percent of the value of a home, with other additional taxes (usually around 0.25 percent) applied locally by various cities and districts. This means that California’s average effective property tax rate is 0.71 percent, below the national rate of 0.99 percent.
Regarding exact estimations, it’s impossible to pinpoint what you might pay each year in property tax without the specifics of the home you plan to buy. House prices differ substantially from one area to the next, with the average home in Riverside costing $537,523 to Irvine’s $1,276,990. Rates of property tax also vary between areas.
| Californian county | Average annual property tax payment | Average effective property tax rate (based on average home prices) |
|---|---|---|
| Alameda | $7,287 | 0.88 percent |
| Contra Costa | $6,254 | 0.95 percent |
| Del Norte | $1,499 | 0.66 percent |
| Los Angeles | $5,073 | 0.82 percent |
| Sacramento | $3,473 | 0.93 percent |
| Santa Cruz | $5,994 | 0.76 percent |
| Trinity | $1,656 | 0.58 percent |
| Yuba | $2,723 | 1.00 percent |
California estate tax
Whether expecting to receive an inheritance or hoping to leave something behind for your loved ones, you may be concerned about how this monetary gift will be taxed.
Thankfully, California has no state-level estate tax or inheritance tax to account for, so there’s no need to worry.
Only six American states require residents to pay any state inheritance tax as of 2023, and only 12 states currently impose estate taxes. California isn’t in either group. It is, however, worth looking into your possible inheritance liabilities if you receive money from someone who isn’t a resident of California.
California motor tax
Many additional costs apply to the expense of a car purchase, from the title and registration fees to possible plate transfer and smog transfer fees. One of the most significant costs to account for is, of course, motor tax. This falls under the same umbrella as sales tax in California.
When you buy a new or used car, a percentage of the price is levied as sales tax. It’s classed as “sales tax for vehicles” and charged at a rate of 7.25 percent, with local taxes potentially bumping this up to 10.25 percent.
2018 data from AutoAlliance reveals that California made a combined $7 billion from car purchases ($5 billion in new vehicles, $2 billion in used vehicles).
California retirement tax
California can be a costly retirement destination. Social Security benefits are exempt from taxation. Beyond this, California fully taxes income from retirement accounts and pensions according to the guidelines set out in the income tax section above.
If you can afford to retire to California, you’ll no doubt enjoy a beautiful, sunny future and a high quality of life. If this article has you rethinking whether the state is right for you, don’t fret. There are many more options to explore. You can also check out the complete guide to which states have the highest and lowest tax rates here.
For further tax guidance and to ensure you’re not paying more tax than you need to it’s wise ot speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed. Find your financial advisor with Unbiased.
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Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.