Yes, California taxes RMD distributions from traditional IRAs, 401(k)s, and similar pre-tax retirement accounts as ordinary income, at rates that run from 1% up to 13.3%. The state does this by piggybacking on federal rules through Revenue and Taxation Code Section 17501, so every dollar you withdraw to meet a required minimum distribution lands in your California adjusted gross income and is taxed at your marginal rate.1California Legislative Information. California Code Revenue and Taxation Code 17501
How Much California Takes
California’s personal income tax brackets run from 1% to 12.3% under Revenue and Taxation Code Section 17041. A separate 1% Mental Health Services Tax applies to taxable income above $1 million, pushing the top effective rate to 13.3%.2California Legislative Information. California Revenue and Taxation Code RTC 17043 Your RMD stacks on top of everything else you earned for the year — wages, pension income, interest, capital gains — so a large forced withdrawal can lift you into a higher bracket than you’d otherwise sit in.
Two things California does not do, and both tend to surprise retirees who moved from other states. There is no partial exclusion or special deduction for private retirement income; some states shield a slice of IRA or pension distributions, but California taxes the whole taxable amount. And you cannot subtract the federal tax you paid on the same distribution. You’re taxed on the gross taxable figure at both levels.
What California Does Not Tax
Social Security benefits are fully exempt from California income tax, which keeps that portion of your retirement income from feeding into bracket creep caused by your RMDs.3State of California Franchise Tax Board. Social Security
Roth IRAs are the other major exception. Because contributions were made with after-tax dollars, qualified Roth distributions are not included in gross income for either federal or California purposes.4Franchise Tax Board. Legal Ruling 1998-4 Roth IRAs are also exempt from RMDs during the original owner’s lifetime, so they generate no forced taxable income at all.
Watch the First-Year Doubling Trap
When your RMDs must begin depends on your birth year. If you were born between 1951 and 1959, they start the year you turn 73. If you were born in 1960 or later, they start the year you turn 75.5Congress.gov. Required Minimum Distribution (RMD) Rules for Original Owners
Your very first RMD comes with a grace period: you can delay it until April 1 of the following year. That option sounds generous and quietly costs people a lot of California tax. Pushing your first RMD into the next calendar year means two RMDs land in the same tax year — the delayed one and that year’s regular one. For someone sitting near the top of a bracket, doubling up can tip tens of thousands of dollars into a higher California rate. Taking the first RMD in the year you actually reach the trigger age usually avoids the pileup.
One narrow delay is legitimate. If you’re still working past your RMD age, you can generally postpone RMDs from your current employer’s 401(k) until you retire, provided you don’t own 5% or more of the company. IRAs and old 401(k)s from prior employers still follow the standard schedule.6Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
Lowering the California Tax With a Qualified Charitable Distribution
If you give to charity anyway, a qualified charitable distribution is the single most effective way to shrink California’s cut of your RMD. A QCD moves money directly from your IRA to a qualifying charity and satisfies part or all of your RMD without the amount ever hitting your adjusted gross income. Because it’s not in your federal AGI, it’s not in your California income either.
For 2026, the annual QCD cap is $111,000 per person, and spouses filing jointly can each use the full limit.7Congress.gov. Qualified Charitable Distributions from Individual Retirement Arrangements The rules are strict:
- You must be at least 70½ when the distribution is made.
- The money must come from a traditional IRA. QCDs cannot be made from 401(k) or 403(b) plans, or from SEP and SIMPLE IRAs you’re still contributing to.
- The custodian must send the funds directly to the charity. If the check passes through your hands, it becomes a regular taxable distribution.
A $20,000 QCD for someone in the 9.3% California bracket saves about $1,860 in state tax, on top of the federal savings. You can also direct up to $55,000 of a QCD, as a one-time election, to a charitable remainder trust or charitable gift annuity.
Inherited IRAs and the 10-Year Squeeze
If you inherited a traditional IRA or 401(k), every dollar you withdraw is taxable California income in the year you receive it. The timing rules depend on your relationship to the original owner.8Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
A surviving spouse can roll the account into their own IRA and use the standard age-based schedule. Non-spouse beneficiaries fall under the SECURE Act’s 10-year rule: the entire inherited account must be emptied by December 31 of the tenth year after the original owner’s death. If the original owner had already started RMDs before dying, the beneficiary also has to take annual distributions in years one through nine.
Where California comes in: beneficiaries who wait until year ten to drain the account can create an enormous one-year spike in state taxable income, pushing well into the upper brackets. Spreading withdrawals across the full ten years usually produces a smaller total California bill than a single large distribution at the end.
Missed RMDs: The Penalty Is Federal, Not Californian
Missing an RMD triggers a federal excise tax of 25% on the shortfall, dropping to 10% if you correct it within the correction window.9Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans You report the penalty on IRS Form 5329, and the IRS can waive it entirely if the shortfall was due to reasonable error and you’ve taken steps to fix it.
California does not impose its own excise tax on missed RMDs. Its exposure is indirect. When you take the makeup distribution to cure the federal problem, that amount becomes California taxable income in the year you receive it, and if your withholding or estimated payments don’t cover the resulting state tax, the Franchise Tax Board’s standard underpayment penalties and interest apply. Those charges are much smaller than the 25% federal excise tax, but they add up if you’ve missed RMDs across multiple years and have to catch up all at once.
Reporting the Distribution on Your California Return
Your plan custodian sends Form 1099-R for each account that paid out during the year. Box 1 is the gross distribution; Box 2a is the taxable amount. For most traditional IRA and 401(k) distributions those two figures match, because the whole withdrawal is taxable.10Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
Full-year residents report the distribution on Form 540; part-year residents and nonresidents use Form 540NR. In most cases the California taxable amount equals the federal taxable amount and no adjustment is needed. The Franchise Tax Board’s Schedule CA (540) instructions confirm that “generally, no adjustments are made” on the IRA and pension lines.11State of California Franchise Tax Board. 2025 Instructions for Schedule CA (540) California Adjustments Adjustments do come up in narrower situations, such as when your California IRA deduction history differs from the federal one, or when railroad retirement benefits are involved.
If RMDs are your main income and you aren’t making quarterly estimated payments, set withholding on each distribution high enough to cover both the federal tax and your California tax. Owing a large balance at filing time can trigger underpayment penalties on top of the tax itself.