When I first moved to the Golden State, I didn't pay attention to their tax laws. I moved to California out of passion for certain interests. Now that I've been living here for a while and am getting accustomed to some of the U.S. economical and social terminology, I've decided to dedicate some time to educating myself on some financial burdens. One of those burdens are tax laws. Let's have a look at what California has to offer.
California's State Tax Rundown
State Sales Tax: California’s state-only sales tax is 6.50 percent. There is a statewide county tax of 1%, and therefore, the lowest rate anywhere in California is 7.5%. This rate will apply until December 31, 2016. Rates will be higher in cities and counties with special taxing districts – between 1.0 percent and 3.5 percent. Publication 71lists combined sales tax rates for California cities and counties. (Food and prescription drugs are exempt.)
Gasoline Tax: * 63.79 cents/gallon (Includes all taxes)
Diesel Fuel Tax: * 65.0 cents/gallon (Includes all taxes)
Cigarette Tax: 87 cents/pack of 20
Personal Income Taxes
Tax Rate Range: Low – 1.0%; High - 13.3%.
Income Brackets: ** Lowest – $7,582; Highest – $508,500
Number of Brackets: 9
Personal Exemptions: Single – $106; Married – $212
Tax Credits: Single - $99; Married – $198; Dependents – $326; 65 years of age or older – $99
Standard Deduction: Single – $3,906; Married filing jointly – $7,812
Medical/Dental Deduction: Same as Federal taxes
Federal Income Tax Deduction: None
Retirement Income Taxes: Social Security and Railroad Retirement benefits are exempt. There is a 2.5% tax on early distributions and qualified pensions. All private, local, state and federal pensions are fully taxed.
Retired Military Pay: Follows federal tax rules.
Military Disability Retired Pay: Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes.
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.
Property is assessed at 100% of full cash value. The maximum amount of tax on real estate is limited to 1% of the full cash value. Under the homestead program, the first $7,000 of the full value of a homeowner’s dwelling is exempt. The Franchise Tax Board’s Homeowner Assistance program, which provided property tax relief to persons who were blind, disabled, or at least 62 years old, and met certain minimum annual income thresholds, has been halted. The state budgets approved for the 2008/2009 and 2009/2010 fiscal years deleted funding for this Homeowner and Renter Assistance Program that once provided cash reimbursement of a portion of the property taxes that residents paid on their home. For more information, call the Franchise Tax Board at 1-800-852-5711, or visit.
The California constitution provides a $7,000 reduction in the taxable value for a qualifying owner-occupied home. The home must have been the principal place of residence of the owner on the lien date, January 1st. To claim the exemption, the homeowner must make a one-time filing of a simple form with the county assessor where the property is located. The claim form, BOE-266,Claim for Homeowners’ Property Tax Exemption, is available from the county assessor. For more information on the property tax program click here.
Inheritance and Estate Taxes
There is no inheritance tax. However, there is a limited California estate tax related to federal estate tax collection.
For further information, visit the California Franchise Tax Board or the California State Board of Equalization.
* Does not include 1 cent local option.
** For joint returns, the taxes are twice the tax imposed on half the income.
This is a simple overview of what California's state tax laws look like. I'll probably be reviewing a few more states in the future. After reading a few financial education books and hearing certain people move to other states solely for the purpose of relieving some tax burdens, I instantly became interested in learning more about it.