If you live or work in Sacramento, there is no city or county income tax to worry about. Your personal income tax obligation goes entirely to the State of California, which taxes income on a graduated scale from 1% to 13.3%. Returns are due April 15, 2026 for the 2025 tax year, and most people file Form 540 with the Franchise Tax Board.
No City or County Income Tax in Sacramento
California does not authorize cities or counties to impose their own income taxes. Only about seventeen states and the District of Columbia permit local income taxes at all, and California is not one of them.1St. Louis. U.S. Cities That Levy Income (Earnings) Taxes You won’t see a Sacramento line on your paycheck, and there is no separate local return to file.
Business owners operating inside city limits do owe a Sacramento Business Operations Tax, but that is a license tax on the business entity, not a personal income tax on the worker. For everyone else, the state return is the entire picture.
What You Actually Pay: California’s Rate Schedule
California uses ten marginal brackets. Under Revenue and Taxation Code Section 17041, the base schedule starts at 1% on the lowest slice of taxable income and climbs through 2%, 4%, 6%, 8%, and 9.3%, with additional brackets at 10.3%, 11.3%, and 12.3% for higher earners.2California Legislative Information. California Revenue and Taxation Code 17041 – Imposition of Tax A separate 1% Mental Health Services surcharge under Section 17043 applies to taxable income above $1 million, pushing the top effective rate to 13.3%, the highest state rate in the country.3California Legislative Information. California Code RTC 17043
The dollar thresholds for each bracket depend on your filing status and adjust each year for inflation using the California Consumer Price Index.4California Legislative Information. California Code RTC 17041 – Imposition of Tax The $1 million threshold for the surcharge does not adjust.3California Legislative Information. California Code RTC 17043 The Franchise Tax Board publishes current rate schedules and a tax calculator on its website each year.
Capital Gains Get No Break
Unlike the federal system, California does not offer preferential rates for long-term capital gains. All gains, short-term and long-term alike, are taxed as ordinary income at the same marginal rates.5State of California Franchise Tax Board. Capital Gains and Losses If you sell a home or stock at a profit, the gain stacks on top of your other income. For high earners that can mean 13.3%.
Unemployment Benefits Are Not Taxed
California does not tax unemployment compensation at the state level, even though it is taxable federally.6State of California Franchise Tax Board. Unemployment If you received benefits, make the subtraction adjustment on Schedule CA (540) to pull that income back out.
Deductions and Credits That Lower the Bill
California has its own standard deduction, separate from the federal one and considerably smaller. For the 2025 tax year it is $5,706 for single filers and $11,412 for married couples filing jointly or heads of household. The amounts adjust slightly each year for inflation. California still permits a few itemized deductions the federal code has eliminated, including miscellaneous deductions above 2% of federal AGI.7State of California Franchise Tax Board. Standard Deduction
California Earned Income Tax Credit
Lower-income workers may qualify for CalEITC. For the 2025 tax year you can claim it if your earned income is $32,900 or less. The credit ranges from $302 with no children up to $3,756 with three or more qualifying children.8Franchise Tax Board. Eligibility and Credit Information CalEITC It’s refundable, so it can generate a refund even if you owe no tax.
Renter’s Credit
Renters below certain income limits qualify for a nonrefundable credit of $60 for single filers earning $53,994 or less, and $120 for joint filers, heads of household, and qualifying widows or widowers earning $107,987 or less.9State of California Franchise Tax Board. Nonrefundable Renter’s Credit The amount is modest, but a lot of people miss it entirely.
Dependent Exemption Credit
California offers $475 per qualifying dependent as a direct credit against tax.10Franchise Tax Board. Tax News October 2025 This is separate from any federal child tax credit.
What Comes Out of Your Paycheck
Beyond state income tax withholding, your Sacramento paycheck includes State Disability Insurance. For 2026, SDI is withheld at 1.3% of wages, and since January 1, 2024 there is no taxable wage ceiling. Every dollar you earn is subject to the SDI deduction.11Employment Development Department (EDD). Determine Taxable Wages and Calculate Taxes For higher-income workers, the removed cap meaningfully increased the amount withheld.
Employers also withhold federal income tax, Social Security at 6.2%, and Medicare at 1.45%. State income tax withholding follows the tables published by the Employment Development Department. None of these are specific to Sacramento, but they round out your actual take-home pay.
How to File Your California Return
Most Sacramento residents file Form 540. If your return is straightforward, the shorter Form 540 2EZ may work.12State of California Franchise Tax Board. Forms and Publications Before starting, gather your W-2s, any 1099s, your federal adjusted gross income (the starting point for the California return), Social Security numbers for everyone on the return, and your bank’s routing and account numbers if you want direct deposit.
CalFile, the FTB’s free electronic filing system, is the fastest route. It gives real-time confirmation and the quickest refund processing.13Franchise Tax Board. CalFile To use it you must have filed a California return in at least one of the previous five years, and there are additional limits on income types, deductions, and the number of dependents.14Franchise Tax Board. CalFile Qualifications 2025 Most commercial tax software supports California e-filing as well.
If you file on paper, the mailing address depends on whether you owe. Returns with a payment go to Franchise Tax Board, PO Box 942867, Sacramento, CA 94267-0001. Returns without a payment go to Franchise Tax Board, PO Box 942840, Sacramento, CA 94240-0001.15Franchise Tax Board. Mailing Addresses
If You Moved Mid-Year or Live Elsewhere
Moved to or from Sacramento during the year, or live outside California but earned income from California sources? File Form 540NR instead.16Franchise Tax Board. Part-Year Resident and Nonresident Part-year residents owe tax on worldwide income received while living in California, plus California-sourced income earned while living elsewhere. Nonresidents owe tax only on California-sourced income, which includes wages for work physically performed here, rent from California property, and income from a California business.
Remote contractors need to pay attention to one wrinkle: California sources service income based on where the customer receives the benefit, not where the contractor sits.16Franchise Tax Board. Part-Year Resident and Nonresident A freelancer in Nevada working for a Sacramento client can still owe California tax on that income.
Deadlines, Extensions, and Penalties
Your 2025 California return is due April 15, 2026, and that is also the date any tax owed must be paid.17State of California Franchise Tax Board. Due Dates Personal California grants an automatic six-month extension to October 15, 2026 with no paperwork required.18Taxes. Extension of Time to File for Individuals The extension buys you time to file, not time to pay. Interest and penalties on any unpaid balance start accruing April 16.
Miss the filing deadline without an extension and the penalty is 5% of the unpaid tax per month (or partial month), capped at 25%, with a minimum penalty equal to the lesser of $135 or 100% of the tax due. File on time but pay late and the penalty is 5% of the unpaid amount plus 0.5% for each additional month, with a combined 25% cap.19Franchise Tax Board. FTB Pub. 1024 Penalty Reference Chart On top of penalties, the FTB charges interest on unpaid balances at 7% through June 30, 2026.20Franchise Tax Board. Interest and Estimate Penalty Rates
Estimated Payments for Self-Employed and Investors
If you don’t have enough tax withheld through a paycheck (because you’re self-employed, have significant investment income, or run a side business), California requires quarterly estimated payments on Form 540-ES. The schedule is not evenly weighted, which catches first-timers off guard:
- April 15, 2026: 30% of estimated annual tax
- June 15, 2026: 40% of estimated annual tax
- September 15, 2026: no payment due
- January 15, 2027: 30% of estimated annual tax
Seventy percent is due by mid-June, and nothing is due in September.21Franchise Tax Board. Estimated Tax Payments Put the dates on your calendar now.
Tracking Your Refund
Use the FTB’s “Check Your Refund” tool after filing. E-filed returns typically produce a refund within about a month. Paper returns take roughly four months.22Franchise Tax Board. Timeframes Returns pulled for accuracy or identity checks take longer. E-filing through CalFile or commercial software is consistently the fastest way to get your money back.