Understanding California's new income tax rate and who it impacts | Dollars & Sense (2024)

FAQs

What is the new tax rate in California? ›

The statewide tax rate is 7.25%. In most areas of California, local jurisdictions have added district taxes that increase the tax owed by a seller. Those district tax rates range from 0.10% to 1.50%. Some areas may have more than one district tax in effect.

The richest 1% of California tax filers pay the largest share of their income in state and local taxes (12.3%), but the 20% of filers with the lowest incomes pay the next highest share (11.4%).

The rich Californians pay 12% of their income. That's partly because the top income tax rate in California for millionaires is 13.3%. In Texas, the top 1% pay an average of 4.6% in taxes, while people in Florida pay 2.7%. Neither has a state income tax.

Senate Bill 69 reduces the individual and corporate income tax rates from 4.65 to 4.55 percent. The bill became effective on May 1, 2024, but the rate reductions are operationally retroactive to January 1, 2024. This follows reforms in 2023 when the state reduced the same rates to 4.65 percent, down from 4.85 percent.

How does California's tax code compare? California has a graduated state individual income tax, with rates ranging from 1.00 percent to 13.30 percent.

While California exempts Social Security retirement benefits from taxation, all other forms of retirement income are subject to the state's income tax rates, which range from 1% to 12.3%. Additionally, California has some of the highest sales taxes in the U.S.

Part-year residents pay taxes on all income received while they are a California resident, as well as on income from California sources while they are a nonresident. Nonresidents pay taxes on income from California sources.

What sources of income are not taxed by California? ›

Social security benefits are not taxable by the State of California. Social security benefits may be taxable by the federal government. Railroad sick pay is also not taxable by the State of California. It is taxable by the federal government unless it is a payment for an on the-job-injury.

The personal income tax is the state's largest revenue source and is expected to comprise 65.9 percent of all General Fund revenues in 2022-23.

California is often described as levying high tax rates on wealthy families, and it is true that California taxes rich people at higher rates than other states. But California's rates on wealthy families are not out of line with how many states tax families of more modest means.

Like most governments, California relies primarily on taxes to fund the public services that it provides to its individuals and businesses. California's state and local governments raise well over $200 billion annually in own-source revenues to provide public services, with roughly 60 percent of this from taxes.

California income tax increase for 2024

The payroll tax expansion increases the state's top income tax bracket from 13.3% to 14.4%. The new 14.4% tax rate applies to income over $1 million. That exceeds other notoriously high-tax states by far. New Yorkers making more than $25 million are taxed at a 10.9% rate.

Why Did My Property Taxes Increase in 2024? California property taxes increase every year at a maximum rate of 2%, so you can expect a slight increase on an annual basis. The specific changes to property tax in 2024 are detailed below.