Go to Retiree Tax Map California Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Mixed Tax Picture California has the highest tax rate in the country, at 13.3% (for millionaires). And while it doesn't tax Social Security income or Railroad Retirement benefits, all other retirement income is fair game. Sales taxes are high. But, there's a significant bright spot: If you're over 65, you get to claim an extra $110 exemption that comes right off your tax bill: Tt reduces what you owe directly, the same way as a federal tax credit would. State Sales Tax 7.25% state levy. Localities can add as much as 2.5%, and the average combined rate is 8.25%, according to the Tax Foundation. Income Tax Range Low: 1% (on up to $16,030 of taxable income for married joint filers and up to $8,015 for those filing individually)High: 13.3% (on more than $1,074,996 for married joint filers and $1 million for those filing individually)Effective income tax rate: 3.1%/individual, 5%/joint Social Security Benefits are not taxed. Exemptions for Other Retirement Income Railroad Retirement benefits are exempt. All private, local, state and federal pensions are fully taxed. There is a 2.5% state penalty on early distributions from retirement plans, annuities and IRAs.IRAsTaxable at ordinary income tax rates. There is a 2.5% penalty on early distributions.401(k)s and Other Defined-Contribution Employer Retirement PlansTaxable at ordinary income tax rates. There is a 2.5% penalty on early distributions.Private PensionsTaxable at ordinary income tax rates. Public PensionsRailroad retirement benefits exempt. All other public pensions are taxable at ordinary income tax rates. Property Taxes Median property tax on California's median home value of $412,700 is $3,160, according to the Tax Foundation.Tax breaks for seniors: In 2014, the Governor reinstated the property tax postponement program, which provides property-tax relief to senior citizens, with revisions. Senior, blind and disabled citizens with an annual income of less than $35,000 and 40% equity in their homes can defer payment of property taxes, beginning September 2016. Each county may also implement a property tax postponement program of its own if it elects to do so. Inheritance and Estate Taxes There is no inheritance tax or estate tax.