California state tax: Overview
California's reputation as a high-tax state is built in part on generally high prices that sometimes result in higher tax bills on lower-taxed items. California also has one of the highest sales tax rates in the U.S., especially on gasoline.
The Golden State also enacted a new tax on guns and ammunition last fall.
[Data for this state tax guide was gathered from several sources including the U.S. Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
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California income taxes
California recently removed the wage ceiling on its payroll tax that is used to fund the State Disability Insurance (SDI) Program. The tax previously applied only on wages up to $153,164. As a result, California's top income tax bracket has increased by 1.1%, to 14.4% for the 2024 tax year.
The top 14.4% income tax rate applies to all California employees with income exceeding $1 million, regardless of filing status.
The lowest California income tax rate of 1% applies on income up to $10,099 for single filers (up to $20,198 for joint filers).
California taxes in retirement: California does not tax Social Security retirement benefits. Tier 1 Railroad Benefits are also exempt. However, other forms of retirement income are taxable.
There's also a 2.5% California state penalty on early distributions from retirement plans, annuities and IRAs. This is in addition to the 10% federal penalty for early withdrawals.
California sales tax
California has a 7.25% state levy. Localities can add as much as 4.75%, and the average combined rate is 8.851%, according to the Tax Foundation.
Although sales tax is high in California, residents don't need to pay tax on certain items.
- Groceries are tax-exempt.
- California banned the "Pink Tax" last year.
- Prescription drugs are tax-exempt.
How much are property taxes in California?
In California, the average effective property tax rate is only 0.75%, but the median property taxes paid are still over $4,000 (one of the highest dollar amounts in the country). However, in the cheapest places to live in California, residents can find median property tax bills below $2,000.
California Property Tax Breaks for Retirees
Property Tax Postponement: In California, some homeowners are eligible to defer current year property taxes. Homeowners must meet certain criteria to qualify for the deferment.
- Must be 62 or older, blind, or have a disability.
- Must have at least 40% equity in the home.
- Annual household income must not exceed $51,762.
(Note: Other criteria may need to be met to qualify.)
Base Year Value Transfer: California residents 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 gas taxes (motor fuel and vehicles)
Motor vehicle sales are taxable at state and local levels. While there is technically no personal property tax on motor vehicles, residents must pay an annual vehicle license fee that is based on the vehicle's value.
California tax on gasoline at $0.579 per gallon, which is one of the highest tax rates in the U.S.
California taxes on alcohol and tobacco
| Cigarettes | $2.87 per pack |
| Other tobacco products | 61.74% of wholesale price |
| Vapor products | 63.49% of wholesale price plus 12.5% of retail price |
| Beer | $0.20 per gallon |
| Wine | $0.20 per gallon |
| Champagne and sparkling wine | $0.30 per gallon |
| Liquor (up to 100 proof) | $3.30 per gallon |
| Liquor (over 100 proof) | $6.60 per gallon |
| Marijuana | 15% state excise tax (subject to change in 2025) |
California estate and inheritance taxes
There is no estate tax or inheritance tax in California.
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