There is no single number that defines high income in California for taxes. The state’s top standard tax bracket begins at $371,479 of taxable income for single filers and $742,958 for married couples filing jointly, with the highest 12.3 percent rate reserved for income above $742,953 (single) and $1,485,906 (joint). A separate 1 percent state surcharge targets anyone earning more than $1 million. Federal surcharges start much earlier, at $200,000 for single filers and $250,000 for joint filers, and several retirement tax benefits begin phasing out around $150,000 to $168,000. Which threshold matters depends on which tax you are asking about.
California’s Top Income Tax Brackets
California’s income tax is progressive under Revenue and Taxation Code Section 17041, and the Franchise Tax Board adjusts the brackets each year for inflation.1Justia. California Revenue and Taxation Code RTC 17041-17061 For the 2025 tax year, the upper tiers look like this for single filers and married couples filing jointly:2Franchise Tax Board. 2025 California Tax Rate Schedules
- 9.3 percent on taxable income above $72,724 (single) or $145,448 (joint). Many residents treat this bracket as the entry point to higher-earner status.
- 10.3 percent above $371,479 (single) or $742,958 (joint).
- 11.3 percent above $445,771 (single) or $891,542 (joint).
- 12.3 percent above $742,953 (single) or $1,485,906 (joint). This is the highest standard statutory rate.
Each rate applies only to the income within its bracket, not to your entire income. Crossing a threshold does not reprice everything you earn below it. The 2026 thresholds will shift slightly higher once the annual inflation adjustment is published.
The 1 Percent Surcharge Above $1 Million
On top of the standard brackets, California adds a flat 1 percent surcharge on all taxable income above $1 million. Revenue and Taxation Code Section 17043, enacted by voters through Proposition 63 in 2004, created this additional tax to fund county mental health programs.3California Legislative Information. California Revenue and Taxation Code RTC 17043 The $1 million trigger is the same for single, joint, and head-of-household filers.
Someone with $1.5 million of taxable income owes the surcharge only on the $500,000 above the threshold, adding $5,000 to the state tax bill. Combined with the 12.3 percent top bracket, this pushes California’s effective top marginal rate to 13.3 percent, the highest state income tax rate in the country.
Federal Thresholds That Stack on Top
Federal rules draw their own high-earner lines, and in several cases those lines sit well below the state’s. For the 2026 tax year, the top federal rate of 37 percent applies to taxable income above $640,600 for single filers and $768,700 for married couples filing jointly.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 When stacked with California’s top rates, the combined marginal rate can exceed 50 percent.
Two federal surcharges kick in earlier and matter for a much broader slice of California earners.
Net Investment Income Tax
The Net Investment Income Tax imposes a 3.8 percent levy on the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds $200,000 (single) or $250,000 (joint).5Internal Revenue Service. Net Investment Income Tax It covers capital gains, dividends, rental income, and other investment earnings.6Internal Revenue Service. Questions and Answers on the Net Investment Income Tax These thresholds are not adjusted for inflation, so more taxpayers cross them each year.
Additional Medicare Tax
A separate 0.9 percent Additional Medicare Tax applies to wages, compensation, and self-employment income above $200,000 (single) or $250,000 (joint).7Internal Revenue Service. Topic No. 560, Additional Medicare Tax You pay this 0.9 percent entirely on your own, and your employer is required to begin withholding it once your wages pass $200,000 in a calendar year, regardless of your filing status.
Capital Gains Are Taxed as Ordinary Income
California does not offer a preferential rate for long-term capital gains. All capital gains run through the same progressive brackets described above.8Franchise Tax Board. Capital Gains and Losses A resident selling appreciated stock or real estate can face a state rate as high as 13.3 percent on the gain.
Federally, long-term gains are taxed at 0, 15, or 20 percent depending on taxable income. The 20 percent federal rate begins at roughly $545,500 (single) and $613,700 (joint) in 2026. Add the 3.8 percent Net Investment Income Tax and California’s top rate, and a resident in the upper brackets can face a combined capital gains rate approaching 37 percent on a single transaction.
Where Retirement Tax Benefits Phase Out
Several retirement savings benefits disappear as your income rises, which gives you a lower practical marker of high-earner status. For the 2026 tax year, Roth IRA contributions begin phasing out at $153,000 for single filers and $242,000 for married couples filing jointly, and are fully eliminated at $168,000 and $252,000 respectively.9Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
Traditional IRA deductions also phase out for workers covered by a retirement plan at work. For 2026, a single filer loses the deduction between $81,000 and $91,000 of modified adjusted gross income. For married couples filing jointly where the contributing spouse has a workplace plan, the range is $129,000 to $149,000. If only your spouse is covered by a workplace plan, your deduction phases out between $242,000 and $252,000.9Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
State Disability Insurance Now Hits Every Dollar
Beginning January 1, 2024, California eliminated the wage cap on State Disability Insurance contributions under Senate Bill 951. Every dollar of wages is now subject to the tax. For 2026, the SDI withholding rate is 1.3 percent.10Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values
A worker earning $500,000 now pays $6,500 a year in SDI, compared to roughly $1,500 under the old capped system. High earners who used to hit the ceiling partway through the year now see the withholding continue on every paycheck through December.
Estimated Tax: The 110 Percent Rule Above $150,000
Prior-year adjusted gross income above $150,000 ($75,000 if married filing separately) is another federal line that treats you as a high earner. The IRS requires quarterly estimated tax payments if you expect to owe at least $1,000 after withholding and refundable credits.11Internal Revenue Service. Estimated Tax To avoid an underpayment penalty, you generally need to pay 90 percent of the current year’s tax or 100 percent of the prior year’s tax through withholding and estimated payments. Cross the $150,000 line in the prior year and that 100 percent safe harbor rises to 110 percent.12Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty Missing it can produce a penalty even if you end up owing nothing at filing.
Underreporting at these income levels compounds quickly. The Franchise Tax Board imposes a 20 percent accuracy-related penalty on any underpayment tied to negligence or a substantial understatement of tax, and a late-filing penalty of 5 percent of the unpaid tax per month, up to 25 percent.13Franchise Tax Board. FTB 1024 Penalty Reference Chart
Medicare Premium Surcharges in Retirement
High income carries into retirement through Medicare’s Income-Related Monthly Adjustment Amounts. If your modified adjusted gross income on your tax return from two years earlier exceeds certain thresholds, you pay more for both Part B and Part D. For 2026, the surcharges begin here:14Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
- Individual filers above $109,000: monthly Part B premium rises to $284.10, with a Part D surcharge of $14.50.
- Individual filers above $500,000: monthly Part B premium reaches $689.90, with a Part D surcharge of $91.00.
- Joint filers above $218,000: the first surcharge tier begins.
- Joint filers above $750,000: the highest tier applies.
At the top tier, a married couple can pay nearly $16,600 a year in combined Part B premiums, compared to about $4,870 at the standard rate. A one-time income spike from a home sale or stock options can increase your Medicare costs two years later.
A Note on Housing Income Limits
California’s Department of Housing and Community Development uses its own definition of high income, classifying households above 120 percent of the local area median income as “above moderate” and ineligible for most state-subsidized housing programs.15California Department of Housing and Community Development. Income Limits That threshold affects housing eligibility, not what you owe in taxes. If you are trying to figure out your tax status, the brackets, surcharges, and phase-outs above are the numbers that apply.