State-by-State Guide to Taxes on Retirees

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NICKNAME
The Golden State

BOTTOM LINE: NOT TAX-FRIENDLY
California is a retiree's tax nightmare. Although Social Security benefits are exempt, all other forms of retirement income are fully taxed. California residents pay some of the highest income taxes in the U.S. The statewide sales tax is high, too. Real estate is assessed at 100% of market value.

STATE SALES TAX
California's minimum combined state, county and local sales and use tax rate dropped to 7.25 percent (6.25 state-only portion and 1 percent collected by localities) on July 1, 2011. Rates are higher in cities and counties with special taxing districts; state and local sales taxes can reach 9.25% in some cities. (Food and prescription drugs are exempt.)

INCOME-TAX RANGE
Low: 1% ($14,910 or more of taxable income for married joint filers, $7,455 or more for those filing individually)
High: 9.3% (on the amount over $96,058 for married joint filers, over $48,029 for those filing individually). California imposes an additional 1% tax on taxable income over $1 million, regardless of filing status.

SOCIAL SECURITY
Benefits are not taxed.

EXEMPTIONS FOR OTHER RETIREMENT INCOME
Railroad Retirement benefits are exempt. There is a 2.5% tax on early distributions and qualified pensions. All private, local, state and federal pensions are fully taxed.

PROPERTY TAXES
Property is assessed at 100% of market value. The maximum amount of tax on real estate is limited to 1% of assessed value. Note, though, that property is generally only reappraised when it changes ownership or has new construction. Under the homestead program, the first $7,000 of the full value of a homeowner's dwelling is exempt.

Tax breaks for seniors: The Homeowner Assistance program, which provided property-tax relief to people who were blind, disabled or at least 62 years old and met certain minimum annual income thresholds, has been halted and has not been funded by the state in recent years.

INHERITANCE AND ESTATE TAXES
There is no inheritance tax and no estate tax.

Visit RetirementLiving.com for a complete rundown of taxes in California.

States More Tax-Friendly for Retirees

• Our picks of the 10 most tax-friendly states for retirees
• The nine states with no income tax
• The five states with no sales tax
• The five states with the lowest sales taxes (including averages of county/city sales taxes)
• The 36 states that don't tax Social Security benefits

States Less Tax-Friendly for Retirees

• Our picks of the 10 least tax-friendly states for retirees
• The seven states with the highest income tax rate (based on highest tax bracket)
• The five states with the highest sales taxes (including average county/city sales taxes)
• The 22 states that impose their own estate taxes or inheritance taxes