Does California Tax Social Security? The Exclusion and Other Income

California does not tax Social Security benefits. Under Revenue and Taxation Code Section 17087, the state excludes Social Security income from its personal income tax entirely, no matter how much you receive or how much other income you have.¹ The federal government may still tax a portion of those same benefits, but your California return will not.

The exclusion is absolute. There is no income cap, no phase-in, and no tiered formula at the state level. Whether your annual benefits are $12,000 or $50,000, the full amount stays out of your California adjusted gross income, and the state’s rates (which run from 1 percent up to 13.3 percent on income above $1 million) never touch it.²

Which Benefits the Exclusion Covers

California’s exclusion reaches more than standard retirement checks. It applies to:

Social Security retirement benefits.
Social Security survivor benefits paid to a spouse, child, or other dependent of a deceased worker.²
Social Security Disability Insurance (SSDI) payments.²
Railroad Retirement Tier 1 benefits (reported on Form RRB-1099).
Railroad Retirement Tier 2 benefits (reported on Form RRB-1099-R), which Section 17087(b) also excludes.¹
Railroad sick pay under the Railroad Unemployment Insurance Act.²

One line to watch for railroad workers: benefits paid directly by an individual railroad and reported on a standard Form 1099-R, rather than by the Railroad Retirement Board, do not qualify and are taxable by California.

Supplemental Security Income (SSI) is a separate program. It is not taxed by either the IRS or California and does not appear on your tax return at all.

How to Subtract Social Security on Your California Return

Your California return starts with your federal adjusted gross income, which already includes any Social Security the IRS treated as taxable. You then back that amount out for state purposes using Schedule CA (540), California Adjustments — Residents.³

On Line 6 of Schedule CA (540), enter the taxable Social Security amount from your federal return in Column B, the subtractions column. That removes it from your California calculation.³ The adjusted totals from Schedule CA flow back into Form 540, and your California adjusted gross income reflects the full exclusion.

The figure you need is the taxable Social Security number already on your federal Form 1040, not the gross benefit. Box 5 of your Form SSA-1099 (or Form RRB-1099) shows net benefits for the year and is the starting point for the federal taxable-portion calculation.⁴ Whatever ended up on the taxable line of your 1040 is what you subtract on Schedule CA.

The Federal Return Is a Different Story

California’s exclusion does not change what the IRS does. Under 26 U.S.C. § 86, the federal government uses a “combined income” formula (your adjusted gross income, plus nontaxable interest, plus half your benefits) to decide how much of your Social Security is taxable.⁵ Up to 50 percent of benefits can be taxable once combined income passes $25,000 for single filers or $32,000 for joint filers; up to 85 percent can be taxable above $34,000 single or $44,000 joint.⁶

So you may well owe federal tax on part of your benefits even though California claims none of it. The Schedule CA subtraction removes the federally taxable portion from your state return regardless of how large it is.

Other Retirement Income California Does Tax

Social Security gets a complete pass. Most other retirement income does not, and this trips up retirees who assume the state goes easy on everything that comes in after they stop working.

Pension payments from public or private employers are taxed as ordinary income at California’s regular rates.
Withdrawals from 401(k) and 403(b) accounts are fully taxable.
The taxable portion of traditional IRA distributions is treated as ordinary income.
Qualified Roth IRA distributions stay tax-free at both the federal and state level.

California also layers an additional 2.5 percent tax on early distributions from retirement accounts before age 59½, replacing the 10 percent federal early-withdrawal penalty for state purposes. Because the top rate on this other retirement income reaches 13.3 percent, a retiree living mostly on IRA or 401(k) withdrawals faces a far larger California bill than one living mostly on Social Security.

You May Not Need to File a California Return at All

If Social Security is your only income, you probably do not need to file in California. Because the benefits are excluded from California gross income, they do not count toward the state’s filing thresholds.

For the 2025 tax year, a single resident age 65 or older with no dependents is not required to file unless gross income tops $30,591. For a married couple filing jointly with both spouses age 65 or older, the threshold is $61,187.⁷ Measure only your non-Social-Security income (pensions, investment earnings, rental income, and other taxable sources) against those figures. If that total stays below the threshold for your filing status, no California return is required.

If You Move In or Out of California

The exclusion works the same way regardless of residency:

Full-year residents report worldwide income to the Franchise Tax Board and subtract Social Security on Schedule CA (540).
Part-year residents keep the Social Security exclusion for the entire year, not just the months spent in California.
Nonresidents with California-source income from a business or rental property are not taxed on Social Security benefits, which the state does not treat as California-source income.

Nonresidents have federal backup as well. Under 4 U.S.C. § 114, no state may tax the retirement income of someone who is not a resident, which protects pensions and IRA distributions (not just Social Security) for people who have moved out of California.⁸

1
California Legislative Information. California Revenue and Taxation Code RTC 17087
2
State of California. Special Circumstances – Section: Social Security
3
Franchise Tax Board. 2025 Instructions for Schedule CA (540) California Adjustments – Residents
4
Internal Revenue Service. Publication 915 – Social Security and Equivalent Railroad Retirement Benefits
5
Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
6
Internal Revenue Service. IRS Reminds Taxpayers Their Social Security Benefits May Be Taxable
7
Franchise Tax Board. 2025 Personal Income Tax Booklet
8
Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income