California State Taxes: What You’ll Owe in the 2026 Tax Season

California has one of the nation’s highest individual income tax rates and high sales tax burdens compared to the rest of the country. Its income tax applies to most retirement income except for Social Security and some railroad retirement benefits.

The big picture:

• Income tax:  The state has a graduated income tax with nine brackets, ranging from 1 percent to 12.3 percent. Single and married filers who make over $1 million pay an additional 1 percent income tax that is earmarked for reforms to improve mental health care.
• Property tax: The effective state property tax was 0.7 percent of a home’s assessed value, according to the Tax Foundation’s most recent data.
• Sales tax: 7.25 percent base sales and use tax, plus some cities and counties add additional local sales tax.

How is income taxed?

The state’s nine tax brackets are below. For example, a single filer with a taxable income of $80,000 would be taxed at 1 percent the first $11,079; the next $11,080 to $26,264 would be taxed at 2 percent and so on. The California Mental Health Services Act, now called the Behavioral Health Services Tax (BHST), imposes an additional 1 percent tax on income over $1 million for single and married filers. This 1 percent additional tax was created through the initiative process and is separate from the tax brackets established in the California Revenue and Taxation Code. Unlike the BHST, the tax brackets are adjusted annually for inflation.

What about investment income? 

Capital gains are taxed at the same rates as other kinds of income. 

Are Social Security benefits taxed? 

No,  California does not tax Social Security benefits.

How is property taxed? 

The average state property tax was 0.7 percent of a home’s assessed value, according to the Tax Foundation’s most recent data. Property taxes vary from one county to the next, with the lowest rate being 0.26 percent in Trinity County and the highest 0.89 percent in Kern County. The lowest median property taxes paid was $1,561 in Modoc County, while the highest median property taxes paid was more than $10,000 in Marin and Santa Clara counties.  

What about sales and other taxes? 

• Sales tax: The state has a 7.25 percent base sales and use tax, plus some cities and counties add additional local sales tax. The Tax Foundation found the average local sales tax to be 1.74 percent, for a combined sales tax rate of 8.99 percent. Exemptions: Prescription medication, some medical devices and some groceries are exempt from sales tax in California. See full list of exemptions here. 
• Gas and diesel: Gas is taxed at 61.2 cents per gallon, while diesel is taxed at 46.6 cents per gallon, though rates are reevaluated and are adjusted on July 1 of each year. 
• Vehicle tax: Residents will pay sales or use tax on the purchase of a vehicle, which is 7.25 percent, plus any local taxes. The state DMV offers fee calculators that can help residents determine what their tax burden is when purchasing a car. California also has an annual registration fee, along with other fees, including the California Highway Patrol fee ($34), vehicle license fee, transportation improvement fee, and a county or district fee. Registration fees vary depending on the vehicle type, purchase price or value, the date the vehicle was purchased or brought into the state, the city or county, the gross vehicle weight and number of axles, among other factors. You can determine a range of additional fees based the vehicle, place of purchase and whether it is new or used here.  
• Alcohol: Sales of alcoholic beverages are subject to state sales tax, plus any local sales taxes. The separate alcoholic beverage tax is an excise tax typically collected at the manufacturer and importer levels. The state assesses a tax of 20 cents per gallon on beer, wine and sparkling hard cider. The tax on champagne and sparkling wine is 30 cents per gallon. The state taxes $3.30 per gallon for spirits that are 100 proof or less, and $6.60 per gallon for spirits above 100 proof. 
• Lottery winnings: Winnings from the California state lottery are not taxed in the state; however, the federal government imposes its own taxes on lottery winnings.

Will my heirs or estate have to pay inheritance and estate tax? 

The state has no formal estate or inheritance tax for people who died on or after Jan. 1, 2005. However, the estate (and anyone who inherits it) may need to pay income taxes if the decedent was a California resident at time of death or if gross income in the year of the death is more than $10,000, or if net income is more than $1,000, or if the estate has income from a California source, or if income is distributed to a beneficiary.  

What are the tax breaks for older residents?

Senior head of household credit: To qualify, residents must be age 65 or older, have qualified as head of household at least one of the past two years (or the previous qualifying spouse has died in the past two years), and their income must be below $98,652. The most that can be claimed is $1,860. Learn how to claim this benefit here.  

Property tax postponement: This program through the state controller’s office allows homeowners who are 62 or older, blind or have a disability to defer current-year property taxes on their primary residence. To qualify, residents must own at least 40 percent equity in their home and have an annual household income of $55,181 or less. The deferment of property taxes is secured by a lien against the property. All deferred taxes and interest are not due until they move, sell the home, die without a spouse or qualified owner, become delinquent on a senior lien, or obtain a refinance or reverse mortgage. 

Senior exemption credit: An individual and their spouse can each claim this tax credit if they are both age 65 or older. In 2025, the credit is $153 for individuals and $306 for those filing jointly.  

Is military retirement pay taxed? 

Military retirement pay is taxable, but starting in 2025, a new partial income exclusion applies to the first $20,000 of that income for most veterans. 

What is the deadline for filing taxes in 2026? 

April 15, 2026. 

 

More AARP Financial Resources

• AARP Retirement Calculator Determine if you are saving enough to retire when — and how — you want.
• AARP’s Social Security Calculator Figure out when to claim and how to maximize your Social Security benefits.
• AARP Tax Tools Explore resources to help you calculate and prepare taxes.