income tax rate california
income tax rate california California levies a 7.25 percent general sales and use tax, which is the highest statewide rate in the nation. Local governments are permitted to levy additional sales and use taxes, and the combined rate of the additional local taxes should not exceed 2 percent. However, some local governments have been given special dispensation to go above this cap. Click here for the California Department of Tax and Fee Administration’s detailed description of the statewide sales and use tax rate, and here for information on additional city and county sales tax rates.
Taxes on Manufacturing Equipment: More Expensive to Make Products in California
California imposes state and local sales tax on manufacturing equipment, at rates above 10 percent in many areas of the state, with only a partial, limited exemption available for manufacturers that meet specific qualifications (the purchaser must be engaged in a specific type of business, and the equipment must meet state requirements and be used in specific ways). This partial, limited exemption is scheduled to expire July 1, 2030, which further reduces its usefulness. In 38 other states that impose sales tax, manufacturing equipment is not subject to the tax, and five other states do not impose any sales tax. Those 43 states have a major competitive advantage over California when manufacturers are deciding where to launch or expand operations (and hire employees to operate the equipment and perform other functions).
Gasoline Tax: Highest in the Nation
Californians pay an additional 70.95 cents per gallon at the pump attributable to state and local taxes and fees, which is the highest in the nation. California’s state excise on gasoline is 53.9 cents per gallon (as of July 1, 2022). According to the nonpartisan Legislative Analyst’s Office, California’s cap-and-trade auction increases the price of gasoline by an additional 23 cents per gallon. The federal excise tax on gasoline adds another 18.4 cents per gallon to the cost at the pump.
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Personal Income Tax: Highest in the Nation
California’s personal income tax has the highest top rate and one of the most highly progressive structures in the nation. California’s top rate is 13.3 percent (including the 1 percent surcharge for mental health programs, for all personal income taxpayers with taxable income over $1 million). Hawaii is second, with a top rate of 11 percent. Most small businesses are S Corporations, partnerships, or sole proprietorships, and pay their business taxes at the rates for individuals, which makes California’s taxes on small businesses some of the most burdensome in the nation. Seven states do not impose a personal income tax.
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Corporate Income Tax: Highest in the West
Those looking to expand or establish a business in California may resort to neighboring states, as California has the highest corporate tax rate in the Western U.S. at 8.84 percent. Only seven states have a higher top corporate tax rate than California (Alaska, Illinois, Iowa, Maine, Minnesota, New Jersey, and Pennsylvania).
California Tax Rate
It is the holiday season; and, while that means different things for different people, there is one thing that all U.S. residents share in common this time of year: It is time to start thinking about your California income tax returns. Learn more about California income tax brackets.
California residents have to pay income tax at the state and federal levels. San Francisco residents also have to pay a 0.38% payroll tax (there are no other local income taxes in California income tax). So, with 2020 right around the corner, how much do you need to be prepared to pay?
California’s Income Tax Brackets for 2019
California’s individual tax brackets apply to single taxpayers as well as married taxpayers and registered domestic partners who are filing separately. For spouses and registered domestic partners who file jointly, the income levels are simply doubled (this is the case with federal income taxes as well, with one exception). As published on Bankrate.com, California’s income tax brackets for 2019 are:
- 1% for taxable income up to $8,544
- 2% for taxable income between $8,545 and $20,255
- 4% for taxable income between $20,256 and $31,969
- 6% for taxable income between $31,970 and $44,377
- 8% for taxable income between $44,378 and $56,085
- 9.3% for taxable income between $56,086 and $286,492
- 10.3% for taxable income between $286,493 and $343,788
- 11.3% for taxable income between $343,789 and $572,980
- 12.3% for taxable income between $572,981 and $999,999
- 13.3% for taxable income of $1,000,000 or more (comprised of a 12.3% income tax rate and a 1% mental health services tax surcharge)
Federal Income Tax Brackets for 2019
At the federal level, the Internal Revenue Service (IRS) has adjusted the individual and joint income tax brackets for inflation for the 2019 tax year. The current federal income tax brackets are as follows:
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- 10% for taxable income up to $9,700 ($19,400 for married couples filing jointly)
- 12% for taxable income over $9,700 ($19,400 for married couples filing jointly)
- 22% for taxable income over $39,475 ($78,950 for married couples filing jointly)
- 24% for taxable income over $84,200 ($168,400 for married couples filing jointly)
- 32% for taxable income over $160,725 ($321,450 for married couples filing jointly)
- 35% for taxable income over $204,100 ($408,200 for married couples filing jointly)
- 37% for taxable income over $510,300 ($612,350 for married couples filing jointly)
Despite being published in this manner, the federal tax brackets are marginal, just as they are in California. In other words, if you and your spouse earn $150,00 in taxable income and file jointly, you would pay federal income tax as follows:
- 12% on $19,400 of your joint income;
- 22% on your joint income between $19,401 and $78,950; and,
- 24% on your joint income between $78,951 and $150,000.
Accurately Calculating Your Taxable Income is Important
As you prepare to file your California and federal income tax returns, it is important to be certain that you are accurately reporting your taxable income and fully paying what you owe. Failing to report income from all sources, taking deductions for which you are ineligible, and otherwise evading your state and federal tax obligations – whether intentionally or unintentionally – can have severe consequences.
Using tax software or hiring a certified public accountant (CPA) to prepare your taxes can help you avoid mistakes. However, as the taxpayer, you are the one who is ultimately responsible for ensuring that you meet your state and federal income tax obligations.
RJS LAW | Southern California’s Finest Tax Law Firm
The California tax attorneys at RJS law represent individuals and businesses in all local, state, and federal tax matters. If you have questions, or if you have been contacted by the California Franchise Tax Board or the IRS, we encourage you to call 619-595-1655 or contact us online for a complimentary consultation.
