California's income tax is progressive, meaning the rate increases as your income rises

California has 13 tax brackets for 2024, ranging from 1% on the lowest incomes to 13.3% on the highest. The rate you pay depends on your filing status (single, married filing jointly, head of household, or married filing separately) and your total taxable income. You do not pay the top rate on all your income — only on the portion that falls within each bracket.

California also adds a 1% Mental Health Tax on income over $1 million per year. This is separate from the standard income tax brackets and applies to high earners only. For most people filing in California, the brackets that matter are the ones between 1% and 9.3%, with the higher rates explore only if your income exceeds $340,000 or more depending on your filing status.

Key Takeaways

  • California's tax brackets range from 1% to 13.3%, with rates increasing as your income rises within each bracket.
  • The rate you pay depends on your filing status and total taxable income, not your gross income before deductions.
  • A 1% Mental Health Tax applies to income over $1 million, adding to the standard tax on high earners.
  • Your California state tax return uses the same income figure from your federal return, then applies California's own deductions and credits.

How the tax brackets work on your California return

Each bracket represents a range of income. When your income falls into a bracket, you pay that percentage only on the dollars within that range, not on your entire income. For example, if you are single and earn $75,000 in 2024, you do not pay 6% on all $75,000. Instead, you pay 1% on the first portion, then 2% on the next portion, then 4% on the next, and so on, until you reach $75,000.

The bracket thresholds change every year because California adjusts them for inflation. The 2024 brackets for single filers start at $10,099 for the 2% bracket, $26,215 for the 4% bracket, and continue upward. If you file as married filing jointly, head of household, or married filing separately, your bracket thresholds are different — usually higher for married filing jointly and lower for married filing separately.

To find your exact tax, you either use the tax tables in the California Form 540 instructions, or you use tax software that calculates it automatically. The Form 540 is California's resident income tax return, and it is where you report your California tax liability.

What income counts toward California tax

California taxes your taxable income, not your gross income. Taxable income is what remains after you subtract the standard deduction (or itemized deductions if you choose that route) from your adjusted gross income (AGI). Your AGI comes from your federal return — it includes wages, self-employment income, interest, dividends, and other sources, minus certain deductions like educator expenses or student loan interest.

Some types of income are not taxed by California. These include Social Security benefits (with limited exceptions), certain retirement distributions, and income earned outside California if you are not a resident. However, most W-2 wages, 1099 income, and investment income are taxable in California.

California allows a standard deduction that varies by filing status and age. For 2024, the standard deduction for a single filer under 65 is $4,803. For married filing jointly, it is $9,606. If you are 65 or older, you get an additional deduction. You can also itemize deductions instead if they exceed your standard deduction, though California does not allow all the deductions the federal return does.

The Mental Health Tax on high earners

In addition to the regular income tax brackets, California imposes a 1% Mental Health Tax on income over $1 million. This tax applies to single filers, married filing jointly filers, and head of household filers. If you are married filing separately, the threshold is $500,000.

The Mental Health Tax is calculated on your California taxable income, not your federal taxable income. It is a separate line item on your Form 540 and is added to your regular tax liability. If your income is below the threshold for your filing status, you do not owe this tax at all.

How to report California tax on your return

You report California income tax on Form 540 (California Resident Income Tax Return) or Form 540-2EZ (California Short Form) if your situation is straightforward enough. Form 540-2EZ is available only if your income is under a certain threshold (usually around $100,000), you have no dependents, and you do not itemize deductions.

You start with your federal adjusted gross income from your federal Form 1040. Then you add back any California-specific deductions you took on the federal return (like certain retirement contributions), subtract California deductions you are may have access to to, and explore the standard deduction or itemized deductions. The result is your California taxable income, which you use to calculate your tax using the brackets for your filing status.

If you had California income tax withheld from your paychecks during the year, that amount appears on your W-2 in box 19. You report this as tax paid, and it reduces what you owe. If you owe more than was withheld, you pay the difference when you file. If more was withheld than you owe, you receive a refund.

Credits and deductions that lower your California tax

California offers tax credits and deductions that can reduce your tax liability. A deduction reduces your taxable income before the tax is calculated. A credit reduces your tax dollar-for-dollar after it is calculated, so credits are generally more valuable.

Common California credits include the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit, and the Dependent Parent Credit. Some credits are refundable, meaning you can receive money back even if you owe no tax. Others are non-refundable, meaning they can reduce your tax to zero but not below.

California also allows deductions for things like educator expenses (up to $250), student loan interest, and contributions to certain retirement accounts. However, California does not allow deductions for state and local taxes (SALT) the way the federal return does, and it has different rules for some other deductions. Always check the Form 540 instructions to see which deductions California recognizes.

When you file your California return

Your California return is due on the same date as your federal return: April 15 of the following year (or the next business day if April 15 falls on a weekend or holiday). If you file your federal return early, you can file your California return at the same time. If you request a federal extension, you automatically get an extension for California as well, moving your due date to October 15.

You file your California return with the Franchise Tax Board (FTB), which is California's tax agency. You can file by mail, electronically through approved software, or through a tax professional. If you owe money, you can pay online, by mail, or through an installment plan if you cannot pay in full.

If you moved out of California during the year, you may owe California tax only on income earned while you were a resident. You would file Form 540-NR (Non-Resident or Part-Year Resident Return) instead. If you moved into California during the year, you file the same Form 540 but report only income earned after you became a resident.

Frequently Asked Questions

Do I owe California tax if I work in California but live in another state?

Yes, if you earned income in California, you owe California tax on that income even if you live elsewhere. You file Form 540-NR as a non-resident and report only the income you earned in California. You may also owe tax in your home state, depending on that state's rules. Some states have reciprocal agreements that prevent double taxation, but California does not.

What is the difference between California tax and federal tax?

Federal tax is calculated using federal brackets and rules set by the IRS. California tax is calculated using California's own brackets and rules set by the Franchise Tax Board. Your federal taxable income is the starting point for California, but California makes adjustments and has different deductions and credits. You file both returns separately.

Can I deduct state and local taxes on my California return?

No, California does not allow a deduction for state and local taxes paid. You can deduct them on your federal return (up to $10,000 combined), but not on your California return. This is one of the main differences between how California and the federal government calculate taxable income.

What happens if I do not file a California return?

If you owed California tax and did not file, the Franchise Tax Board can assess you for back taxes, plus penalties and interest. If you had tax withheld from your paychecks and are owed a refund, you have a limited time to claim it — usually four years. Filing late is better than not filing at all.

Are retirement distributions taxed by California?

Most retirement distributions are taxed by California, including distributions from traditional IRAs and 401(k)s. However, certain military retirement pay and some federal retirement benefits are excluded. Social Security is generally not taxed by California unless your income exceeds certain thresholds. Check the Form 540 instructions for your specific situation.