California was the first state to gain fame as a retirement destination. Unfortunately it has lost that distinction due to a reputation for high taxes. The State Income Tax in California varies from 1% to 9.3% which is one of the highest state income rates in the nation.
All residents of the Golden State have to pay a minimum income tax rate of 1%. Persons that earn between $7,169 and $16,994 a year have to pay a rate of 2%. Those who earn between $16,994 and $26,821 a year are subject to a 4% income tax rate. Individuals that earn between $26,822 and $37,233 a year face a 6% rate. Taxpayers who earn between $37,234 and $47,055 a year have an 8% rate. Filers that earn more than $47,056 a year face the 9.3% state income tax rate. The state charges an additional 1% mental health tax on those who earn more than $1 million a year.
California is one of the few states that charges an alternative minimum tax or AMT. The current AMT rate in California is 7.5%, this tax can be levied on filers who are not paying taxes because of exemptions.
Income Tax Filing in the Golden State
Although all California residents are theoretically subject to the state income tax not everybody is required to file a tax return.
California requires fulltime residents who earn more than $14,754 a year and married couples that earn more than $29,508 a year to file a state-tax return. Persons over 65 do not have to file a state tax return if they make less than $19,704 a year. Married couples do not have to file a state tax return if both spouses are over 65 and they make less than $39,408 a year.
Part-time residents are required to file a California tax return if their income from all sources exceeds the levels specified in the state's Individual Filing Requirements. Persons who have a winter home in California will have to file a California income tax return.
California Sales Tax
The average rate for sales taxes is in California is between 7.5% and 8.25%. The state itself collects a 7.5% Sales Tax on most retail sales. Cities, counties, and special districts collect additional taxes on top of this. The sales tax applies to most retail sales but not to groceries or prescription drugs.
California has a Use Tax that can affect some sales by private individuals including the sale of vehicles. The use tax rate is the same as the sales tax.
California Property Taxes
Property tax rates in California can vary widely because each city, county, and special district in the state can levy different amounts of property tax. To determine the tax rate on a California property, residents will have to contact their County Assessor's Office. The assessor is the official that sets the property tax rates.
Annuities in California
Unlike most states, California will not insure annuities for up to $100,000. Instead the maximum amount the state would pay an annuity holder would be $80,000 if the insurance company that issued it went out of business. Most states will insure annuities for up to $100,000 and some cover annuities up to $250,000.
|Cost of Living Rank:||#48|
|Sales Tax:||7.5% - 8.5%|
|Income Tax:||Up to 9.3%|