The taxes in California and their rates cover income, sales, property, business, payroll, and a range of excise categories. Personal income runs on a ten-bracket schedule topping out at 13.3%. Sales tax starts at a 7.25% state base and climbs with local district add-ons. Property tax is capped at 1% of assessed value under Proposition 13. Businesses owe an $800 minimum franchise tax plus rates that vary by entity. Payroll withholding funds state disability. Fuel, tobacco, cannabis, and alcohol each carry their own excise rates. California levies no estate or inheritance tax.
Personal Income Tax Rates and Brackets
California’s income tax is progressive with ten brackets. Rates start at 1% and step up through 2%, 4%, 6%, 8%, 9.3%, 10.3%, 11.3%, and 12.3%. A 1% Mental Health Services Tax applies to all taxable income above $1 million, bringing the effective top rate to 13.3%.1Tax Foundation. State Individual Income Tax Rates and Brackets, 2026 That surcharge applies to every dollar above the threshold regardless of filing status.
For 2025, single filers and those married filing separately hit the brackets at these thresholds:
- 1%: up to $11,079
- 2%: $11,079 to $26,264
- 4%: $26,264 to $41,452
- 6%: $41,452 to $57,542
- 8%: $57,542 to $72,724
- 9.3%: $72,724 to $371,479
- 10.3%: $371,479 to $445,771
- 11.3%: $445,771 to $742,953
- 12.3%: $742,953 and above
- 13.3%: above $1,000,000 (includes the Mental Health Services Tax)
Married couples filing jointly and heads of household get wider brackets at each tier.2Franchise Tax Board. 2025 California Tax Rate Schedules California does not fully index its brackets to inflation every year, so a raise that only keeps pace with prices can still push part of your income into a higher rate.
The standard deduction is $5,706 for single filers and those married filing separately, and $11,412 for joint filers, heads of household, and qualifying widows or widowers.3Franchise Tax Board. Deductions You can itemize if your deductions exceed those amounts, though California limits or disallows certain federal itemized deductions.
Capital Gains
California draws no distinction between short-term and long-term capital gains. All gains are taxed as ordinary income at the same progressive rates that apply to wages. A long-term stock or business sale that pushes total income above $1 million faces the full 13.3% top rate at the state level, with no exclusion, deferral, or preferential rate on investment income held longer than a year.
Sales and Use Tax
The statewide base sales tax rate is 7.25%. Local districts add their own levies of between 0.10% and 2.00%, which pushes the combined rate above 10% in many cities.4California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rate Information Retailers collect the tax and remit it to the California Department of Tax and Fee Administration (CDTFA). A companion use tax covers items bought from out-of-state sellers for use inside California.
Groceries for home consumption and prescription medications are the main everyday exemptions. Most digital goods are also not taxable: software downloads, e-books, mobile apps, and streaming content delivered electronically are generally exempt. That exemption disappears if the transaction includes any physical medium like a flash drive or printed backup, which makes the entire sale taxable.5California Department of Tax and Fee Administration. Internet Sales Publication 109 Nontaxable Sales
Property Tax Under Proposition 13
Proposition 13, codified as Article XIII A of the California Constitution, caps the base property tax rate at 1% of assessed value.6Justia. California Constitution Article XIII A Section 1 Tax Limitation Assessed value is generally the purchase price, and annual increases are limited to 2% regardless of how much market value rises. Full reassessment typically only happens on a change in ownership or new construction. Two neighbors with identical homes can carry very different tax bills depending on when each bought.
Owner-occupants can reduce assessed value by $7,000 through the homeowners’ exemption, worth roughly $70 a year at the 1% rate. To claim the full exemption, file with your county assessor by February 15 and occupy the home as your principal residence on January 1.7California State Board of Equalization. Homeowners Exemption
The 1% base is a floor, not a ceiling. Voter-approved bonds for schools and infrastructure appear as separate line items and push the effective rate higher. Newer developments often sit within Community Facilities Districts, commonly called Mello-Roos districts, that levy additional special taxes for roads, parks, and fire stations. These can add hundreds or thousands of dollars a year and travel with the property when it sells. Check the total tax rate, not just the base assessment, before buying in a new development.
Business and Corporate Taxes
Every corporation, LLC, and limited partnership registered or doing business in California owes an $800 annual minimum franchise tax. It applies even if the entity earns nothing or sits dormant. Newly formed corporations are exempt in their first taxable year.8Franchise Tax Board. Corporations LLCs had a similar first-year waiver between 2021 and 2024, but that temporary exemption has expired.9Franchise Tax Board. Limited Liability Company Failing to pay can result in suspension of the entity’s legal rights.
Beyond the minimum, entity rates differ:
- C-corporations: 8.84% of net income
- S-corporations: 1.5% of net income (remaining profit passes through to shareholders)
- Banks and financial corporations: 10.84% of net income
LLCs not taxed as corporations owe a graduated annual fee on top of the $800 minimum, based on total California-sourced income:
- $250,000 to $499,999: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
The “total income” figure for the LLC fee is unusually broad. It includes gross income plus the cost of goods sold, not just net profit.11Franchise Tax Board. Limited Liability Company Filing Information Businesses with high revenue and thin margins get caught by this.
Payroll Tax
California’s State Disability Insurance (SDI) is funded entirely through an employee payroll tax. For 2026, the SDI withholding rate is 1.3% of all wages with no cap on taxable earnings.12Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Removing the wage ceiling in 2024 was a significant change. Before that, SDI only applied to the first $153,164 in wages. A worker earning $500,000 now pays SDI on every dollar, adding $6,500 in annual withholding. The tax funds short-term disability benefits and the Paid Family Leave program. Employers do not match it.
Excise Taxes
Gasoline and Diesel
California’s gasoline excise tax for the period from July 2025 through June 2026 is $0.612 per gallon.13California Department of Tax and Fee Administration. Sales Tax Rates for Fuels The rate adjusts annually. Diesel carries its own rate, and both fuels also face sales tax calculated on the retail price. The excise tax is baked into the pump price.
Tobacco
Cigarettes carry a combined excise tax of $2.87 per pack of 20, effective July 2025.14California Department of Tax and Fee Administration. Tax Rates Special Taxes and Fees That figure includes the $2-per-pack surcharge added by Proposition 56 in 2016. Other tobacco products face a percentage-based equivalent rate.
Cannabis
Licensed cannabis retailers collect a 15% excise tax on gross receipts of every retail sale under Revenue and Taxation Code Section 34011.2.15California Department of Tax and Fee Administration. Cannabis Tax Law Sec 34011.2 This replaced the prior version of the tax under Section 34011, which became inoperative in April 2023, and eliminated the separate weight-based cultivation tax that growers previously paid. The excise tax sits on top of any applicable state and local sales taxes. The statute authorizes CDTFA to raise the rate in future years, up to a maximum of 19%, to replace revenue the old cultivation tax would have generated.
Alcohol
California levies its own state excise taxes on alcoholic beverages, separate from federal alcohol taxes. State rates vary by category, with distilled spirits carrying the highest per-gallon rate, followed by wine and beer. These are collected at the wholesale level and folded into the shelf price. Rates are set by statute and do not adjust annually for inflation.
Vehicle Registration
The annual Vehicle License Fee (VLF) is 0.65% of the vehicle’s current market value as determined by the DMV. It functions as a personal property tax and declines each year as the vehicle depreciates. Zero-emission vehicles registered as model year 2020 or later pay an additional $121 Road Improvement Fee to compensate for gasoline tax revenue they don’t generate.16California State Department of Motor Vehicles. Registration Fees Standard registration and flat fees apply on top of the VLF.
What California Doesn’t Tax
California excludes all Social Security income from state taxation. You subtract the amount included in your federal adjusted gross income when preparing your California return.17Franchise Tax Board. Social Security Other retirement income, including pension distributions and traditional IRA withdrawals, remains fully taxable at regular rates.
California imposes no state estate tax and no inheritance tax. The state eliminated its estate tax requirement for anyone who died on or after January 1, 2005, and the older inheritance tax was repealed decades earlier.18California State Controller’s Office. California Estate Tax Federal estate tax may still apply if an estate exceeds the federal exemption, but California takes nothing from the transfer.