California state tax 2025: 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 is also one of the most expensive states for homeowners due to generally high home prices.
In the News: Earlier in the year, multiple wildfires devastated California. The fires ravaged over 57,000 acres, damaged or destroyed over 18,000 buildings, and affected hundreds of thousands of lives.
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As fire victims start to rebuild, it's important to know the steps to take to apply for federal assistance or insurance reimbursement. One of those key steps is to reconstruct tax records.
For more information, see California Fires: How to Recover Tax Records and Other Important Documents.
Additionally, wildfire victims also have tax deadline extensions for federal and state returns. Several different deadlines apply. For more information, see California Tax Deadline Extension: What to Know.
[Data for this state tax guide was gathered from several sources including the U.S. Census Bureau, the Tax Foundation, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
California state income tax
Last year, California 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 of California's tax expansion, the state's top income tax bracket has increased by 1.2%, to 14.5% for the 2025 tax year.
The top 14.5% 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 $10,756 for single filers (up to $21,512 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 8.802%, according to data presented by 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."
- Prescription drugs are tax-exempt.
How much are property taxes in California?
In California, the average effective property tax rate is only 0.68%, but the median property taxes paid are still over $5,000 (one of the highest dollar amounts in the country).
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 $53,574.
(Note: Other criteria may need to be met to qualify.)
Base Year Value Transfer: Eligible California residents age 55 or older can transfer their home's "tax value" to a new home in the state. Generally, three transfers are allowed per person.
California gas taxes (motor fuel)
- Gasoline: $0.596 per gallon
- Diesel: $0.454 per gallon
Source: California Department of Tax and Fee Administration.
California taxes on alcohol and tobacco
| Cigarettes | $2.87 per pack |
| Other tobacco products | 52.92% of wholesale price |
| Vapor products | 52.92% 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 |
Source: California Department of Tax and Fee Administration.
California estate and inheritance taxes
There is no estate tax or inheritance tax in California.
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