California State Tax Guide

Bottom Line

Middle-Class Families: Most Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)

Retirees: Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)

The Golden State's reputation as a high-tax state is built in part on how aggressively it goes after big earners, with a 13.3% income tax rate that kicks in at $1 million (for single filers) of taxable income. But the state's income tax brackets are actually very progressive, so for more modest incomes, the impact is far milder.

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It's a similar story with property taxes, which in wealthy areas like Silicon Valley are high (and much lamented). But using a statewide average, California's median property tax rates are the 16th-lowest in the country.

Where do Californians pay high taxes? On gasoline, for one (currently the highest in the nation). Sales taxes are pretty darn high, too. But in the end, when you balance out all the pros and cons, California is actually a good state for most residents when it comes to taxes, thanks mainly to the reasonable income tax rates for ordinary people.

California is also offering a one-time "Middle Class Tax Refund" for current residents who filed 2020 state returns. The state began sending payments in early October and expects to have 95% of all payments delivered by the end of 2022.

California Income Taxes

California Income Tax Range

Low: 1% (on up to $20,198 of taxable income for married joint filers and up to $10,099 for those filing individually)

High: 13.3% (on more than $1,354,550 for married joint filers and $1 million for those filing individually)

California Taxation of Social Security Benefits

Social Security benefits are not taxed by the state.

California Tax Breaks for Other Retirement Income

Income from private, government and military retirement plans is generally taxed by California to the same extent that it's taxed at the federal level. However, there are some differences between California and federal law that may cause the amount of your California retirement income to be different than the amount reported for federal purposes.

There's also a 2.5% state penalty on early distributions from retirement plans, annuities and IRAs. This is in addition to the 10% federal penalty for early withdrawals.

In addition, an income tax credit of up to $1,695 is available for the 2022 tax year if you're at least 65 years old, you qualified as a head-of-household filer for at least one of the past two years, your qualifying person died in the past two years, and your income is less than $89,931.

Railroad Retirement benefits are generally exempt, although Tier 2 benefits paid by individual railroads are taxable by California.

California Sales Tax

7.25% state levy. Localities can add as much as 2.5%, and the average combined rate is 8.82%, according to the Tax Foundation.

• Groceries: Exempt
• Clothing: Taxable
• Motor Vehicles: Taxable
• Prescription Drugs: Exempt

California Real Property Taxes

In California, the median property tax rate is $742 per $100,000 of assessed home value.

California Property Tax Breaks for Retirees

For the 2022-23 fiscal year, homeowners over 62 (or who are blind and disabled), with an annual income of less than $49,017 for the 2021 calendar year and at least 40% equity in their homes can defer payment of property taxes. Interest on the unpaid amount is charged.

Any person age 55 or older can transfer their home's "tax value" to a new home in the state. If the new home's market value is greater than the old home's market value, the difference is added to the tax value. Generally, three transfers are allowed per person.

California Motor Fuel Taxes

Gasoline: 68.15¢ per gallon.

Diesel: 99.91¢ per gallon

Both rates are the highest in the country.

California Sin Taxes

Cigarettes: $2.87 per pack

All other tobacco products: 61.74% of wholesale cost

Vapor products: 63.49% of wholesale cost, plus 12.5% excise tax

Beer: $0.20 per gallon

Wine: $0.20 per gallon ($0.30 per gallon for champagne and sparkling wine)

Liquor: $3.30 per gallon (100 proof or less); $6.60 per gallon (over 100 proof)

Marijuana: 15% state excise tax on retail sales; local taxes may also apply (state rate may be increased to meet revenue goals, but can't exceed 19%)

California Estate and Inheritance Taxes

No estate or inheritance tax.