Tool | November 2017

State-by-State Guide to Taxes on Retirees


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The Bottom Line
Map of California

Mixed Tax Picture

California has the highest tax rate in the country, at 13.3% (for millionaires). And while it doesn't tax Social Security income or Railroad Retirement benefits, all other retirement income is fair game. Sales taxes are high. But, there's a significant bright spot: If you're over 65, you get to claim an extra $110 exemption that comes right off your tax bill: Tt reduces what you owe directly, the same way as a federal tax credit would.

State Sales Tax

7.25% state levy. Localities can add as much as 2.5%, and the average combined rate is 8.25%, according to the Tax Foundation.

Income Tax Range

Low: 1% (on up to $16,030 of taxable income for married joint filers and up to $8,015 for those filing individually)

High: 13.3% (on more than $1,074,996 for married joint filers and $1 million for those filing individually)

Effective income tax rate: 3.1%/individual, 5%/joint

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt. All private, local, state and federal pensions are fully taxed. There is a 2.5% state penalty on early distributions from retirement plans, annuities and IRAs.


Taxable at ordinary income tax rates. There is a 2.5% penalty on early distributions.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Taxable at ordinary income tax rates. There is a 2.5% penalty on early distributions.

Private Pensions

Taxable at ordinary income tax rates.

Public Pensions

Railroad retirement benefits exempt. All other public pensions are taxable at ordinary income tax rates.

Property Taxes

Median property tax on California's median home value of $412,700 is $3,160, according to the Tax Foundation.

Tax breaks for seniors: In 2014, the Governor reinstated the property tax postponement program, which provides property-tax relief to senior citizens, with revisions. Senior, blind and disabled citizens with an annual income of less than $35,000 and 40% equity in their homes can defer payment of property taxes, beginning September 2016. Each county may also implement a property tax postponement program of its own if it elects to do so.

Vehicle Taxes

California charges an annual fee that functions much like a property tax. The rate is 0.65% of the actual purchase price and is reduced for the first 11 years of ownership. For example, the VLF on a two-year-old vehicle purchased for $25,000 would be $147.

Inheritance and Estate Taxes

There is no inheritance tax or estate tax.