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2017 California Income Tax: What You Need to Know

By Matthew Frankel, CFP® - Apr 27, 2017 at 10:42AM

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Here's how California's income tax system works, so you can figure out how much you may need to pay.

California's marginal income tax rates range from 1% to 13.3%, separated into nine tax brackets plus an additional tax on income over $1 million. Unlike the federal tax brackets, California's do not impose a "marriage penalty": Its income thresholds for married couples filing jointly are exactly double those for singles.

California income tax rates

The 2017 California marginal tax brackets have not been posted on the state's website as of this writing. California's tax brackets are indexed for inflation each year, and this is based on the observed rate of inflation from July 1 through June 30.

Orange County, California.

Image source: Getty Images.

For example, the rate of inflation in California from July 1, 2015, through June 30, 2016, was 2.1%. Therefore the 2016 tax brackets were adjusted upward by this amount, and we won't know how much the 2017 brackets will change until inflation data for the period ending June 30, 2017 becomes available.

Having said that, California has nine marginal tax brackets ranging from 1% to 12.3%, and the only difference between the 2016 and 2017 income ranges should be a slight upward adjustment to account for inflation. So here are the 2016 brackets to use as a guide:

Marginal Tax Rate

Single or Married Filing Separately

Married Filing Jointly

Head of Household

1%

$0-$8,015

$0-$16,030

$0-$16,404

2%

$8,015-$19,001

$16,030-$38,002

$16,040-$38,003

4%

$19,001-$29,989

$38,002-$59,978

$38,003-$48,990

6%

$29,989-$41,629

$59,978-$83,258

$48,990-$60,630

8%

$41,629-$52,612

$83,258-$105,224

$60,630-$71,615

9.3%

$52,612-$268,750

$105,224-$537,500

$71,615-$365,499

10.3%

$268,750-$322,499

$537,500-$644,998

$365,499-$438,599

11.3%

$322,499-$537,498

$644,998-$1,074,996

$438,599-$730,997

12.3%

$537,498 and above

$1,074,996 and above

$730,997 and above

Data source: State of California Franchise Tax Board (FTB).

In addition, there is an extra 1% mental-health services tax on taxable income in excess of $1 million, which effectively makes California's top marginal tax rate 13.3%.

Other California tax rates

In addition to the tax rates listed above, there are some other California tax rates to be aware of:

  • California has an alternative minimum tax (AMT) with a rate of 7%.
  • California's corporate tax rate is 8.84% for most corporations and 10.84% for banks and financial corporations.

Exemptions, deductions, and credits

  • California has an exemption credit of $111 for singles and heads of households, and $222 for married couples filing jointly. These begin to phase out for higher-income taxpayers.
  • There is a standard deduction of $4,129 (single or married filing separately) or $8,258 (married filing jointly or head of household).
  • Itemized deductions are reduced for high-income taxpayers, defined for 2016 as AGI above $182,459 (single or married filing separately), $273,692 (head of household), or $364,923 (married filing jointly).
  • California has an earned income tax credit (EITC) available to households with federal AGI of up to $14,162 with two or more children, and lower limits for one or no children.
  • There is a credit available for low- to middle-income renters, worth $60 (single or married filing separately) or $120 (married filing jointly or head of household).
  • Seniors who are heads of households qualify for a credit of up to $1,345.

Note that this isn't meant to be an exhaustive list -- just an overview of the most commonly used exemptions, deductions, and tax credits available in California.

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