California Tax: Guide to Income, Sales, Property, and Retirement Taxes

(Image credit: Getty Images)

Navigating the complexities of state taxes can be daunting, but understanding California's tax landscape is essential for residents and newcomers alike.

In this guide, we'll explore key components of The Golden State's tax system, from income and sales taxes to property taxes and retirement benefits.

California state tax 2025: Overview

When people think of California, sunshine and beaches often come to mind, but often, so do high taxes.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

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.

In the News: Earlier this 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 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 income tax

A California street with mountains in the background framed by palm trees.

California has a graduated individual state income tax ranging from 1% to 13.3%, with some areas collecting local income tax.

Effective as of 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.

California retirement taxes

California is 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%.

Social Security: Not taxable
401(k) and IRA Distributions: Taxable
Pensions: Taxable

California sales tax

Still life of a small shopping cart with $1 USD bills

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

rendering of a yellow car against a yellow background

Gasoline: $0.30 per gallon
Diesel: $0.13 per gallon

Source: Sales Tax Handbook

California taxes on alcohol and tobacco

Swipe to scroll horizontally

California tobacco taxes
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

Swipe to scroll horizontally

California alcohol taxes
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.

Katelyn has more than 6 years of experience working in tax and finance. While she specialized in tax content while working at Kiplinger from 2023 to 2024, Katelyn has also written for digital publications on topics including insurance, retirement, and financial planning and had financial advice commissioned by national print publications. She believes knowledge is the key to success and enjoys providing content that educates and informs.

With contributions from