California state tax 2024: 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: Some high earners in the Golden State can expect to pay more California tax this year. That’s because the state has eliminated the wage cap on its 1.1% employee payroll tax for State Disability Insurance (SDI).
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Gov. Gavin Newsom says the tax expansion will “ensure more low-wage workers, many of them women and people of color, can access the time off they’ve earned while still providing for their family.”
For more information, see California Tax Expansion: Who Pays the Price?
Also, will California voters decide on tax hikes in the state going forward?
The upcoming November ballot in California could redefine the state's tax landscape. That’s due to an initiative backed by business groups designed to protect Californians from what proponents describe as an unsustainable state tax regime.
If approved, the Taxpayer Protection and Government Accountability Act could have significant implications for Californians. It would limit future tax increases at state and local levels to curb what proponents see as excessive taxation without sufficient oversight. See Kiplinger's report: Are Big Tax Changes Coming to California in November?
[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 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 of California's tax expansion, the state'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 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 0.71%, but the median property taxes paid are still over $4,500 (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: 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: $0.579 per gallon ($0.596 on July 1, 2024)
- Diesel: $0.441 per gallon ($0.454 in July 1, 2024)
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 |
California estate and inheritance taxes
There is no estate tax or inheritance tax in California.
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