California Tax Guide: Rates, Brackets & Strategy

Tax Overview

California imposes the highest state income tax rate in the nation at 13.3%, applied through a steeply progressive bracket system with nine tiers. The top rate applies to income above $1 million, with an additional 1% mental health services tax surcharge. Even moderate-income earners face rates that are higher than most other states, with the 9.3% bracket kicking in at around $68,000 for single filers.

Despite the high income taxes, California's sales tax situation is also significant. The statewide base rate is 7.25%, the highest state-level sales tax in the country, and local additions push the combined rate above 8.6% on average. Groceries are exempt from sales tax, but most other goods and many services are taxable. The combination of high income and sales taxes makes California one of the most heavily taxed states overall.

Property taxes in California are somewhat moderated by Proposition 13, which caps the tax rate at 1% of the purchase price and limits annual assessment increases to 2%. This means long-time homeowners often pay far less in property taxes than recent buyers of comparable homes. California does not tax Social Security benefits but does tax most other forms of retirement income, and the state has no inheritance or estate tax.