California has one of the highest state income tax rates in the United States, with a progressive tax system that ranges from 1% to 13.3%. The state uses nine income tax brackets, plus an additional Mental Health Services Tax surcharge on income exceeding $1 million. Based on California Franchise Tax Board (FTB) guidelines.
California Tax Brackets (2026)
California's brackets differ by filing status. Below are the rates for single filers, married filing jointly, and head of household.
An additional 1% Mental Health Services Tax applies to taxable income over $1 million for all filing statuses, bringing the top effective rate to 13.3%. See the FTB Mental Health Services Tax page for details.
Mental Health Services Tax
Proposition 63, passed by voters in 2004, imposes a 1% surcharge on taxable income exceeding $1,000,000. This applies regardless of filing status and funds community mental health programs statewide.
- Applies to all income over $1,000,000 (not just wages)
- Effectively creates a 10th bracket at 13.3%
- Cannot be offset by credits or deductions
- Employers withhold at the supplemental rate of 10.23% for bonuses and RSUs, but high earners may owe additional tax at filing
What You'll See on Your Paystub
A California worker's paystub includes federal income tax withholding plus state-specific deductions:
| Deduction | Rate | Notes |
|---|---|---|
| Federal Income Tax | Varies | Based on W-4 and income |
| CA State Income Tax | 1% - 13.3% | Progressive, based on DE 4 and income |
| Social Security | 6.2% | Up to $181,200 wage base |
| Medicare | 1.45% | No wage limit; additional 0.9% over $200,000 |
| CA SDI (State Disability Insurance) | 1.2% | On wages up to $163,410 |
| CA Paid Family Leave (PFL) | Included in SDI | Funded through SDI withholding |
California Standard Deduction
California's standard deduction is lower than the federal standard deduction:
| Filing Status | Standard Deduction (2026) |
|---|---|
| Single | $5,540 |
| Married Filing Jointly | $11,080 |
| Head of Household | $11,080 |
California does not conform to the higher federal standard deduction. You use separate California-specific deduction amounts when calculating your state tax liability.
State Disability Insurance and Paid Family Leave
California SDI is a mandatory payroll deduction that funds two benefit programs:
State Disability Insurance (SDI)
- 2026 rate: 1.2% of wages up to $163,410
- Provides short-term disability benefits (up to 52 weeks) if you cannot work due to non-work-related illness, injury, or pregnancy
- Appears on your paystub as "CA SDI" or "CASDI"
- Maximum annual withholding: approximately $1,960.92
Paid Family Leave (PFL)
- Funded through the same SDI withholding — no separate deduction on your paystub
- Provides up to 8 weeks of partial wage replacement to care for a seriously ill family member, bond with a new child, or assist with military deployment
- Benefit amount: approximately 60% to 70% of your weekly wages (depending on income)
SDI and PFL are employee-paid only. Your employer does not contribute. If your paystub shows a separate "PFL" line, it is still funded from the same SDI rate.
No Local Income Taxes
California does not allow cities or counties to impose local income taxes. Your state withholding covers all California income tax obligations. While cities like San Francisco and Los Angeles have business taxes, these do not appear as deductions on individual worker paystubs.
Los Angeles Metro Workers
Los Angeles is California's largest metro area and the second largest in the nation:
- Entertainment and media (film, TV, streaming, gaming)
- Healthcare (Cedars-Sinai, UCLA Health, Kaiser Permanente)
- International trade through the Port of Los Angeles and Port of Long Beach
- Aerospace and defense (SpaceX, Northrop Grumman, Raytheon)
- No local income tax, but high cost of living significantly impacts effective take-home pay
San Francisco Bay Area Workers
The Bay Area is the center of the U.S. technology industry:
- Major tech employers: Apple, Google, Meta, Salesforce, and hundreds of startups
- Biotech corridor (South San Francisco, East Bay)
- Financial services (San Francisco)
- Highest median wages in the state, but among the highest cost of living nationally
- No local income tax
Bay Area workers earning stock compensation should review the tech industry section below. RSUs and stock options are taxed as regular income in California.
San Diego Workers
San Diego has a diversified economy:
- Military and defense (Naval Base San Diego, Marine Corps Base Camp Pendleton)
- Biotech and life sciences (Illumina, Dexcom)
- Tourism and hospitality
- University research (UC San Diego, Scripps)
- No local income tax
Sacramento Workers
Sacramento is the state capital:
- State government is the largest employer
- Growing technology sector
- Healthcare (UC Davis Medical Center, Sutter Health)
- More affordable than coastal metros, stretching take-home pay further
- No local income tax
Tech Industry: Stock Compensation
California is home to the largest concentration of tech workers in the U.S. If you receive RSUs, stock options, or other equity compensation, the tax impact is significant:
- California taxes RSU vesting and stock option exercises as ordinary income at your marginal rate (up to 13.3%)
- Employers withhold at the state supplemental rate of 10.23% for RSUs and bonuses, which often under-withholds for high earners
- If you relocate out of California mid-year, the state may still tax stock compensation that vested while you were a resident
- Capital gains on stock held after vesting are taxed at your ordinary income rate (California does not have a lower capital gains rate)
If your employer withholds at the 10.23% supplemental rate on large RSU vests, you may owe additional California tax when you file. Consider making estimated payments to avoid underpayment penalties.
Retirement Income
California taxes most forms of retirement income:
- Social Security: Fully exempt from California income tax
- Pensions (public and private): Fully taxable at your marginal rate
- 401(k) and 403(b) distributions: Fully taxable
- IRA withdrawals (traditional): Fully taxable
- Roth IRA qualified distributions: Exempt (contributions were already taxed)
California is one of the less tax-friendly states for retirees with pension or 401(k) income. However, the full Social Security exemption benefits lower-income retirees.
Military Personnel
California has a significant military presence, including Camp Pendleton, Naval Base San Diego, Edwards Air Force Base, Travis Air Force Base, and Fort Irwin.
Military tax considerations in California:
- Active duty military pay for non-residents stationed in California is exempt from California income tax under the Servicemembers Civil Relief Act (SCRA)
- California residents serving out of state still owe California income tax on their military pay
- Military retirement pay is fully taxable by California
- Military spouses may elect to use the service member's state of legal residence under the Military Spouses Residency Relief Act (MSRRA)
California vs. Neighboring States
| State | Tax Structure | Top Rate |
|---|---|---|
| California | Progressive (9 brackets) | 13.3% |
| Oregon | Progressive | 9.9% |
| Nevada | None | 0% |
| Arizona | Flat | 2.5% |
| Washington | None | 0% |
Comparing Take-Home Pay
Here is how annual state income tax compares for a single filer in California versus neighboring states at different salary levels:
| Annual Salary | California | Oregon | Nevada | Arizona |
|---|---|---|---|---|
| $50,000 | ~$1,580 | ~$3,500 | $0 | ~$1,100 |
| $75,000 | ~$3,200 | ~$5,600 | $0 | ~$1,700 |
| $100,000 | ~$5,200 | ~$7,400 | $0 | ~$2,300 |
| $150,000 | ~$9,850 | ~$12,200 | $0 | ~$3,500 |
California's effective rate at $75,000 is roughly 4.3%, which is lower than the 9.3% marginal bracket because of the graduated structure. However, the SDI deduction adds another 1.2%, bringing total state payroll deductions closer to 5.5%.
Key Takeaways
- California's top rate of 13.3% is the highest state income tax rate in the nation
- Nine tax brackets mean lower earners pay significantly less than the top marginal rate
- SDI at 1.2% is a mandatory employee-paid payroll deduction that funds disability and paid family leave
- No local income taxes — the state rate is the only income tax you pay
- Stock compensation (RSUs, options) is taxed as ordinary income at your marginal rate
- Social Security is exempt, but pensions and 401(k) distributions are fully taxable
- Non-resident military personnel stationed in California are exempt from CA income tax on military pay