Middle class families: Most tax-efficient (see Kiplinger tax card for middle-class families)
Retired: Taxation (Go to Kiplinger tax card for retirees)
The Golden State’s reputation as a high-tax state rests in part on its aggressiveness toward big earners, with a 13.3% income tax rate that hits $1 million (for single filers) of taxable income. But the state income tax brackets are actually very progressive, so for lower incomes the impact is far softer.
It’s a similar story with property taxes, which in wealthy places 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 nation.
Where do Californians pay high taxes? On gasoline, for one (currently the highest in the country). Sales taxes are also very high. But at the end of the day, when you balance all the pros and cons, California is actually a good state for most residents when it comes to taxes, mainly thanks to reasonable income tax rates for regular people. .
California income taxes
California income tax range
Down: 1% (on up to $18,650 of taxable income for married joint filers and up to $9,325 for those filing individually)
High: 13.3% (on more than $1,250,738 for married co-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 pension plans is generally taxed by California to the same extent that it is taxed federally. However, there are certain differences between California law and federal law that may cause the amount of your California retirement income to be different from the amount reported for federal purposes.
There is also a 2.5% state penalty on early distributions from pension plans, annuities, and IRAs. This is in addition to the 10% federal penalty for early withdrawals.
Railroad retirement benefits are generally exempt, although Tier 2 benefits paid by individual railroads are taxable in California.
California sales tax
State levy of 7.25%. Localities can add up to 2.5%, and the average combined rate is 8.82%, according to the Tax Foundation.
- Races: Exempt
- Clothes: Taxable
- Motor vehicles: Taxable
- Prescription drugs: Exempt
California property taxes
In California, the median property tax rate is $742 per $100,000 of estimated property value.
California property tax relief for retirees
For the 2021-22 fiscal year, homeowners over age 62 (or blind and disabled), with an annual income of less than $45,810 for the 2020 calendar year and an equity of at least 40% in their home may defer the payment of property taxes. Interest on the unpaid amount is charged.
Anyone age 55 or older can transfer the “tax value” of their home to a new home in the state. If the market value of the new home is higher than the market value of the old home, the difference is added to the tax value. Generally, three transfers are allowed per person.
California Fuel Taxes
Gasoline: 68.15¢ per gallon.
Diesel: 99.91¢ per gallon
These two rates are the highest in the country.
California Sin Taxes
cigarettes: $2.87 per pack
All other tobacco products: 61.74% of wholesale cost
Steam products: 63.49% of wholesale price plus 12.5% excise tax
Beer: $0.20 per gallon
Wine: $0.20 per gallon ($0.30 per gallon for champagne and sparkling wine)
Alcohol: $3.30 per gallon (100 prints or less); $6.60 per gallon (over 100 proofs)
Marijuana: 15% state excise tax on retail sales; local taxes may also apply (state rate may be increased to meet revenue goals, but may not exceed 19%)
Estate and Estate Taxes in California
No inheritance tax or inheritance tax.