Taxes in California cover income, sales, property, business activity, and specific products like fuel and tobacco, with several rates ranking among the highest in the country. Personal income tax runs from 1% up to a top effective rate of 13.3%. Sales tax starts at a 7.25% statewide base and climbs higher with local district taxes. Property tax is capped at 1% of a home’s purchase price under Proposition 13. Businesses pay a minimum $800 franchise tax every year on top of whatever income tax their structure requires. The Franchise Tax Board handles income taxes for individuals and businesses; the California Department of Tax and Fee Administration handles sales, fuel, tobacco, alcohol, cannabis, and other special taxes.1California Department of Tax and Fee Administration. About the California Department of Tax and Fee Administration
Personal Income Tax
California’s personal income tax is progressive, with nine brackets running from 1% to 12.3%. A separate 1% surcharge under the Mental Health Services Act applies to any taxable income above $1 million, which pushes the effective top rate to 13.3%.2California Legislative Information. California Revenue and Taxation Code 17043
For the 2025 tax year (filed in 2026), single-filer brackets are:3Franchise Tax Board. 2025 California Tax Rate Schedules
- 1% on income up to $11,079
- 2% from $11,080 to $26,264
- 4% from $26,265 to $41,452
- 6% from $41,453 to $57,542
- 8% from $57,543 to $72,724
- 9.3% from $72,725 to $371,479
- 10.3% from $371,480 to $445,771
- 11.3% from $445,772 to $742,953
- 12.3% on income of $742,954 or more
Thresholds for married couples filing jointly are roughly double the single-filer amounts, and the dollar ranges adjust each year for inflation. The percentage rates themselves don’t change.
The state’s standard deduction is $5,706 for single filers and $11,412 for married couples filing jointly or heads of household in 2025.4Franchise Tax Board. Deductions Itemizing makes sense when your deductible expenses exceed those figures.
Residency Determines What California Can Tax
A California resident owes state tax on all income no matter where it was earned, including remote wages paid by an out-of-state employer, investment returns, and rental income from property in other states. A nonresident owes California tax only on income from California sources, like wages for work physically performed in the state. Part-year residents allocate income based on the portion of the year they lived in California.
The Franchise Tax Board looks at where your primary home is, where you work, where your children attend school, where you are registered to vote, and where you spend most of your time to decide residency.5Franchise Tax Board. Residents Disputes often come up when someone claims to have moved to a state with no income tax but keeps a home, business, or close personal ties in California.
Social Security Is Not Taxed
California excludes Social Security retirement, survivor, and disability benefits from state taxable income.6California Department of Tax and Fee Administration. Special Circumstances Those benefits may still be partially taxable on your federal return.
Sales and Use Tax
The statewide base sales tax rate is 7.25%. Cities and counties add local district taxes on top to fund transportation and other regional projects, so the total you pay at the register varies by location and can exceed 10% in some areas. Retailers collect the tax at the point of sale and remit it. If a retailer fails to collect, the retailer, not the buyer, is liable for the unpaid amount plus interest.
Most grocery food meant for home consumption is exempt, as are prescription medications dispensed by a licensed pharmacist. Prepared hot food, restaurant meals, and food served at venues that charge admission are taxable.7California Department of Tax and Fee Administration. Common Sales and Use Tax Nontaxable Sales and Partial Exemptions
Use tax covers the gap. When you buy something from an out-of-state seller who doesn’t collect California sales tax, you owe use tax at your local sales tax rate.8California Department of Tax and Fee Administration. California Use Tax Most large online retailers now collect it automatically, but purchases from smaller out-of-state sellers or private parties can still require you to self-report, typically on a line of your California income tax return.
Property Tax
Property tax rules in California come from Proposition 13, passed in 1978. The base rate is capped at 1% of a property’s assessed value, and the assessed value itself can only rise 2% a year or the rate of inflation, whichever is lower.9Justia Law. California Constitution Article XIII A Section 1 – Tax Limitation Voter-approved bonds and special assessments can add to that 1%, so the actual bill often runs somewhat higher.
Assessed value resets to market price when the property changes ownership or when new construction is completed. A home purchased in 1995 for $400,000 can still carry an assessed value well below its current market worth. When it sells, the new owner’s tax base resets to the full purchase price.
Proposition 19 Changed Parent-Child Transfers
Before February 2021, parents could pass a home to their children while keeping the low assessed value, even if the child used it as a rental. Proposition 19 narrowed that. A child who inherits a parent’s home now has to use it as their own primary residence and file for the homeowner’s exemption within one year of the transfer to keep the parent’s low tax base.10California State Board of Equalization. Proposition 19 Fact Sheet
Even then, the exclusion is capped. The excluded value is the existing assessed value plus about $1 million, adjusted every two years. The figure in effect through February 2027 is $1,044,586. If the home’s market value exceeds the combined amount, the overage gets added to the assessed value. Investment properties, vacation homes, and homes the child doesn’t actually live in no longer qualify for any parent-child exclusion.
Payment Dates
Property taxes are paid in two installments. The first is due by December 10, the second by April 10.11California Department of Tax and Fee Administration. Property Tax Function Important Dates Missing either triggers a late penalty.
Business Taxes
Every corporation, LLC, and limited partnership incorporated, registered, or doing business in California owes an annual minimum franchise tax of $800, whether or not the business turned a profit.12Franchise Tax Board. Limited Liability Company
C-corporations pay 8.84% on net income on top of the $800 minimum.13Franchise Tax Board. C Corporations Banks and financial institutions pay 10.84%.14Franchise Tax Board. Business Tax Rates
S-corporations pay a 1.5% entity-level tax on net income, with the $800 as the floor.15Franchise Tax Board. S Corporations The income then passes through to shareholders’ personal returns.
LLCs pay the $800 plus a graduated fee based on total California income (gross, not profit):12Franchise Tax Board. Limited Liability Company
- Under $250,000: no additional fee
- $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
Because the fee runs on gross income, an LLC can owe thousands even in a break-even or losing year.
A business that doesn’t pay its franchise tax or file required returns can be suspended by the Franchise Tax Board. A suspended business loses the right to operate, sell real property, file lawsuits, defend itself in court, maintain an appeal, or formally dissolve.16Franchise Tax Board. My Business Is Suspended Any contract signed while suspended can be voided by the other party, and the business can lose its name to another registrant.
Excise Taxes
Excise taxes apply to specific products and are usually built into the retail price rather than listed separately.
- Motor vehicle fuel: $0.612 per gallon as of July 2025, on top of federal fuel tax and the sales tax that also applies to gasoline.17California Department of Tax and Fee Administration. Fuel Taxes
- Cigarettes: roughly $2.87 per pack, including the Proposition 56 surcharge voters added in 2016.
- Cannabis: a state excise tax collected at the point of retail sale, in addition to regular sales tax. Rates have been the subject of recent legislative proposals, so check CDTFA for the current figure.
- Alcohol: beer, wine, and distilled spirits each carry different per-gallon rates, with spirits taxed highest.
Revenue from these taxes is generally earmarked. Fuel taxes fund transportation infrastructure, tobacco taxes support healthcare programs, and cannabis revenue funds youth drug prevention, environmental restoration, and law enforcement.
No State Estate or Inheritance Tax
California does not have an estate tax or an inheritance tax. Heirs owe the state nothing based on the value of what they receive. Larger estates may still face federal estate tax, and inherited real property is still subject to the Proposition 13 and Proposition 19 reassessment rules above.
Filing Deadlines and Late Penalties
California personal income tax returns for 2025 are due April 15, 2026. The state grants an automatic six-month extension to file, moving the paperwork deadline to October 15, 2026, with no application required.18Franchise Tax Board. Extension to File The extension does not extend the payment deadline. Any tax owed is still due April 15, and unpaid balances accrue interest from that date.19Franchise Tax Board. Due Dates Personal
Miss the April deadline without filing or paying, and the Franchise Tax Board charges a delinquent filing penalty of 5% of the unpaid tax for each month or part of a month the return is late, capped at 25%.20Franchise Tax Board. Common Penalties and Fees If the FTB sends a formal demand letter and you still don’t file, a separate 25% demand penalty applies on top.