California State Taxes Among the Highest in the Nation

A Quick Reference Guide for California State Taxes

Golden Gate bridge at sunset
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California state taxes are among the worst in the country, according to the Tax Foundation, a non-partisan, non-profit research group in Washington D.C. The state has the highest state-level sales tax rate in the nation at 7.5 percent, although this is slated to drop to 7.3 percent at the end of 2016. Combined with local sales taxes, the rate can reach as high as 10 percent in some California cities.

The state also has some of the highest income tax rates in the country.

Here's how California state taxes will affect you if you’re buying a home there, making money there -- or even just shopping. 

California Property Tax

Property in California is assessed at 100 percent of its full cash or fair market value, but you might catch a few property tax breaks provided for under California law:

  • The maximum tax on real estate is limited to 1 percent of its full cash value under Proposition 13. Taxes cannot increase more than 2 percent over the previous year. 
  • Homeowners who live in their homes as their principal residences qualify for a $7,000 reduction in the taxable value of their property under the state's homestead program. 
  • Senior citizens, the blind and the disabled can postpone their property taxes for their principal places of residence under the property tax postponement program beginning Sept. 1, 2016. 

    California's homeowner and rental assistance program, which effectively reimbursed qualified taxpayers for a portion of property taxes paid on their homes or as part of their rental payments, has been discontinued. 

    California State Income Tax

    California personal income tax rates range from 1 to 13.3 percent, and they're levied on both residents’ incomes and income earned within the state by non-residents.

    The highest rate of 12.3 percent begins at income levels of $526,444 or more as of 2016, with an extra 1-percent surcharge tacked onto incomes over $1 million. The lowest 1-percent rate is reserved for earners of $7,850 or less in taxable income. 

    Many of your federal deductions may be limited or disallowed in California, but other state tax credits are available, including an exemption credit for yourself and your dependents, a credit for renters, a credit for single or divorced parents, and a credit for people who have dependent parents. 

    More: Detailed information on California income tax

    Capital Gains Tax in California 

    California tax law includes no special provisions for capital gains. You'll pay taxes on profits at your personal income tax rate if you sell any property, including real estate or assets such as stocks, for more than your tax basis or investment in it. If your sale is such that you must also pay the federal long term capital gains tax rate of 20 percent, you'll end up paying the second-highest capital gains tax rate in the world.

    California Inheritance and Estate Taxes

    This is one area in which California residents get a tax break. When federal estate tax laws changed after Jan. 1, 2005, the legislation eliminated California's estate tax. California has no inheritance tax

    Other California State Taxes 

    Like most states, California also taxes cigarettes and gasoline. A pack of cigarettes will cost you an extra 87 cents in taxation, and gas runs an additional 38.5 cents per gallon, including an excise tax of 36 cents plus an additional 2.25 percent sales tax. 

     

     

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