California state tax 2025: Overview
When people think of California, sunshine and beaches often come to mind, but so do high taxes. Part of the reason is simple: things just cost more here, and when prices go up, so do the taxes that come with them, even on items that aren’t heavily taxed elsewhere.
Add to that one of the highest sales tax rates in the country, especially at the gas pump, and it’s easy to see why the Golden State has a reputation for being pricey.
For homeowners, the picture doesn’t get much rosier. Sky-high home prices make California one of the most expensive places in the U.S. to own property.
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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.
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
California has a graduated individual state income tax ranging from 1% to 13.3%, with some areas collecting local income tax.
California retirement taxes
California is ranked by Kiplinger as one of the worst states to retire when it comes to taxes. Some retirees might pay an income tax rate as high as 13.3%.
Income Tax on Taxable Income: California has nine income tax brackets, which is more than in most states. Rates range from 1% to 13.3%. Effective in 2024, a California tax expansion mandates a 1.1% payroll tax for employees making more than $1 million. So, if you're a high earner who is still working during retirement, you could pay more state tax than you did before.
- Social Security: Not taxable
- 401(k) and IRA Distributions: Taxable
- Pensions: Taxable
California sales tax
California has a 6% sales tax rate. Localities can add as much as 5.25%, and the average combined rate is 8.817%, according to data presented by the Tax Foundation.
- Groceries: Exempt
- Prescription drugs: Exempt
- Clothing: Taxable
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
- Gasoline: $0.30 per gallon
- Diesel: $0.13 per gallon
Source: Sales Tax Handbook
California taxes on alcohol and tobacco
Product | Tax Amount |
|---|---|
Cigarettes | $0.87 per pack |
Other tobacco products | 28.13% of wholesale price |
Medical Marijuana | 15% |
Recreational Marijuana | 22.25% (15% state cannabis excise tax + 7.25% California cannabis sales tax) |
Source: Sales Tax Handbook
Product | Tax Amount |
|---|---|
Wine | $0.20 per gallon |
Beer | $0.20 per gallon |
Liquor | $3.30 per gallon |
Source: Sales Tax Handbook
California estate and inheritance taxes
There is no estate tax or inheritance tax in California.
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