California taxes its residents more heavily than almost any other state overall, but the picture is uneven: the state has the country’s highest top income tax rate and the highest base sales tax rate, yet its property taxes run below the national average and it charges no estate or inheritance tax. If you are asking how California taxes compare to other states, the honest short answer is that most working residents pay more here than they would almost anywhere else, while retirees living on Social Security and long-time homeowners see some of the gap close.
Income Tax: The Highest Top Rate in the Country
California’s personal income tax runs from 1% at the bottom to 12.3% on taxable income above roughly $700,000 for single filers, with an additional 1% Mental Health Services Tax on income over $1 million that brings the effective top rate to 13.3%.1California Legislative Information. California Code RTC 17041 – Imposition of Tax2California Legislative Information. California Code RTC 17043 – Additional Tax No other state’s top rate comes close.
Nine states charge no personal income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Several more use a single flat rate that applies to everyone. A middle-income Californian will not pay 13.3%, but the middle brackets still sit higher than the flat rates most other states use. Across income levels, a California household typically owes more state income tax than a comparable household almost anywhere else.
Where California’s Income Code Hits Harder Than People Expect
Three features surprise people moving in from other states.
Capital gains get no special treatment. California taxes long-term gains as ordinary income and runs them through the same brackets as wages.3State of California Franchise Tax Board. Capital Gains and Losses The federal government and a number of states give long-term gains a discounted rate or partial exclusion. California does not. A large sale can face a state rate as high as 13.3%.
Retirement income is fully taxable, with one exception. Withdrawals from 401(k) plans, traditional IRAs, and pensions all flow through the ordinary income brackets.4State of California Franchise Tax Board. Publication 1005 – Pension and Annuity Guidelines Social Security benefits, including survivor’s and disability benefits, are not taxed at all.5California Tax Service Center. Special Circumstances Only eight states tax Social Security in any form, so California is in the majority there. The comparison that matters for retirees is against no-income-tax states like Florida, Nevada, and Texas, where pension and 401(k) distributions also escape state tax entirely.
The state standard deduction is small. For 2025, the California standard deduction is $5,706 for single filers and $11,412 for married joint filers.6State of California Franchise Tax Board. Deductions The federal standard deduction for 2026 is $16,100 and $32,200. A married couple taking the standard deduction on both returns exposes roughly $20,000 more income to California tax than to federal tax.
Sales Tax: Highest Base Rate in the Nation
California’s statewide base sales and use tax rate is 7.25%, the highest state-level base rate in the country.7California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rate Information Local district taxes add another 0.10% to 2.00% on top, and cities can stack multiple districts. Alameda, Compton, and Culver City all reach 10.75%.8California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rates
Five states charge no sales tax: Oregon, Delaware, Montana, New Hampshire, and Alaska (though some Alaska municipalities levy their own). Tennessee and Washington sometimes rival California’s combined rates, but those states use sales tax as their primary revenue source and have no income tax. California is unusual in stacking a top-tier sales tax on top of a top-tier income tax. On a $40,000 car in a 10.25% jurisdiction, the sales tax alone comes to about $4,100. The same purchase in Oregon carries no state sales tax at all.
Property Tax: Lower Rate, Higher Prices
Property tax is the one major category where California undercuts most of the country. Under Proposition 13, Article XIII A of the state constitution caps the base property tax rate at 1% of assessed value at the time of purchase, and the assessed value can rise by no more than 2% per year afterward.9California Legislative Information. California Constitution Article XIII A – Tax Limitation Effective rates typically fall between 0.70% and 0.80%, well below the national average and far below states like New Jersey and Illinois, where effective rates routinely exceed 2%.
The rate comparison flatters California because home prices don’t cooperate. A 0.75% rate on a $900,000 California home produces a $6,750 bill. A 2.1% rate on a $250,000 Midwestern home produces $5,250. The check a California homeowner actually writes often looks like the check anyone else writes, or larger.
Business Taxes: A Costly Place to Incorporate
C-corporations pay a flat 8.84% on net income, above the 4% to 7% range typical in most states.10California Legislative Information. California Code Revenue and Taxation Code RTC 23151 – Tax on Corporations South Dakota, Wyoming, and Nevada charge no corporate income tax at all.
Then there is the $800 minimum franchise tax. Every corporation, LLC, and limited partnership owes $800 a year regardless of income.11State of California Franchise Tax Board. Corporations The first-year exemption that existed for entities formed between 2021 and 2023 has closed, so businesses formed in 2024 or later owe the $800 in year one.12State of California Franchise Tax Board. Limited Liability Company Most other states either have no equivalent minimum or charge a much smaller filing fee.
LLCs also pay a graduated fee based on total California gross income, not profit. The fee starts at $900 for gross income of $250,000 and climbs to $11,790 at $5 million or more, on top of the $800 minimum.12State of California Franchise Tax Board. Limited Liability Company Few states impose a revenue-based fee like this on LLCs, and thin-margin businesses feel it hardest.
Estate and Inheritance Tax: The Clear Advantage
California imposes no estate tax and no inheritance tax. When a resident dies, the only estate tax exposure is federal, which in 2026 applies only to estates above $13.99 million per individual. Below that threshold, heirs pay nothing at any level.
About 18 states and the District of Columbia impose an estate tax, an inheritance tax, or both, and several set their exemption thresholds far below the federal level. Estates worth $1 million to $5 million can trigger state-level tax bills in those places that would not exist in California. For wealthy residents weighing California’s high income taxes against other states, this is a meaningful offset, especially where wealth sits in appreciated assets rather than annual income.
Gas and Cigarette Taxes
California’s state excise tax on gasoline is 61.2 cents per gallon as of July 2025, and it adjusts annually for inflation under the Road Repair and Accountability Act of 2017.13California Department of Tax and Fee Administration. Tax Rates – Special Taxes and Fees – Fuel Taxes Combined with federal excise tax and other state fees, the per-gallon cost is among the highest in the country. Prices drop noticeably at the Arizona and Nevada borders.
The state cigarette tax is $2.87 per pack, set when Proposition 56 took effect in 2017.14California Department of Tax and Fee Administration. Cigarette and Tobacco Revenue (Table 30A) That rate runs higher than most southern states but lower than parts of the Northeast, where per-pack taxes can exceed $4.
Moving Out Doesn’t Automatically End Your California Tax Bill
The Franchise Tax Board treats you as a California resident if you are in the state for anything other than a temporary or transitory purpose, or if your permanent home is in California even during time away.15Franchise Tax Board. Residency and Sourcing Technical Manual Spending more than nine months in California during a tax year creates a presumption of residency, though it can be rebutted.
For anyone splitting time between California and a no-income-tax state, the FTB looks at where your closest ties are: bank accounts, driver’s license, where your kids attend school, where you vote. Buying a home in Nevada or Texas does not end California tax obligations if the FTB decides your dominant ties are still here. Nonresidents who earn income from California sources, including rental properties and freelance work for California clients, owe California tax on that income specifically. A move should be planned as a tax event, not just a change of address.