2024-2025 California State Income Tax Rates

Beyond the standard deduction, there are various itemized deductions you can claim, such as mortgage interest, state and local taxes, charitable contributions, and more. However, it’s important to keep detailed records and guarantee that your deductions meet the IRS requirements. Consulting a tax professional can help you maximize your tax savings and avoid any potential issues. These inflation-based updates are critical, as they prevent the dreaded “bracket creep” that can push you into a higher tax bracket even if your real income hasn’t increased. With the new adjustments, you’ll find that your taxable income is now subject to a lower rate, allowing you to keep more of what you’ve earned. This enhanced financial flexibility can make a significant difference in your overall quality of life, empowering you to allocate your resources more effectively.

Personal Exemption Credit System

The federal tax brackets range from 10% to 37%, while California’s top rate is 12.3% (or 13.3% for income over $1 million). California’s state income tax rates are among the highest in the nation. Getting a handle on how the Golden State’s tax system works can help you minimize your tax burden by taking advantage of available credits and deductions. The deadline to file your California state income tax return is typically April 15th, the same as the federal tax deadline. However, if you need more time, you can request an extension until October 15th.

How is income taxed in California?

California’s income tax rates are progressive, which means that the more you earn, the higher your tax rate will be. In other words, higher incomes are taxed at higher percentages. The table below shows the 2025 tax brackets and rates for individuals. California has one of the highest marginal tax rates in the country.

California Standard Deduction 2025

Yes, California offers several tax credits, such as credits for dependent care, education expenses, and renters. Review the eligibility requirements for each credit to see if you qualify. By using deductions and credits, you can potentially lower your overall tax liability and keep more of your income. California funds the state disability insurance program through a progressive payroll tax, beginning at 1.1%. In 2024, the wage ceiling was lifted, subjecting all wage income to the supplemental payroll tax.

• We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will manage your bookkeeping and file taxes for you.
• Each marginal rate only applies to earnings within the applicable marginal tax bracket.
• To determine your tax liability, you must apply the correct tax rate to each portion of your income based on California’s progressive tax brackets.
• The change particularly affects compensation planning for those considering stock options, bonuses, or salary versus distribution strategies.
• This means that regardless of where you are in the state, you will pay an additional 6.00% of the purchase price of any taxable good.
• Eligibility extends to households earning up to $31,950 annually, creating planning opportunities for business owners with a variable income.

DonateAs a nonprofit, Bookkeeping for Startups we depend on the generosity of individuals like you. California is one of the worst states to retire when it comes to taxes. So, if you’re a high earner who is still working during retirement, you could pay more state tax than you did before.

Qualifying deductions might include an itemized deduction, the California standard deduction, exemptions for dependants, business expenses, etc. We are a tax and accounting firm based in South Florida, but we serve the entire country. Our professionals know the laws and regulations in force to perform the task of preparing and advising individuals on their annual returns. As of January 1, 2025, New Hampshire repealed its interest and dividends tax, joining the group of seven other states with no individual income tax.

As part of the Mental Health Services Act, this tax provides funding for unearned revenue mental health programs in the state. It functions like a normal income tax and means that the top marginal rate in California is, effectively, 13.3%. That’s the highest rate in the U.S., but it only applies to income earners with over $1 million in taxable income. The table below further demonstrates tax rates for Californians. Understanding California’s state income tax is crucial whether you’re a longtime resident or new to the state. The progressive tax structure, varied brackets, and additional considerations like standard deductions and sales tax all play a role in how much you’ll owe.

2 – California Personal Exemptions

Married couples filing jointly with a $120,000 income will also benefit, as their marginal rate drops from 22% to 12%. These adjustments aim to provide much-needed tax relief for the state’s middle class. Here’s how the Federal Income Tax compares with the California Income Tax. The tables below represent tax rates corresponding to relevant tax brackets for single filers and married people filing jointly.

How do the California Income Tax Rates compare with the Federal Tax Rates?

Consulting a tax professional can also guarantee you take advantage of all the deductions you’re qualified for. Calculating your california income tax brackets taxable income begins with determining your gross income and then subtracting eligible deductions. When it comes to gross income deductions, there are several key areas to consider. This is how you reduce your tax burden and maybe even move into a lower tax bracket.