California Tax Guide for the Year 2025
In California, residents and visitors alike are affected by a unique tax landscape that varies from the national average. Here's a breakdown of some key points to consider.
As of 2024, a California tax expansion mandates a 1.1% payroll tax for employees earning more than $1 million. This tax expansion is one of several measures that contribute to California having one of the highest sales tax rates in the country, averaging 8.817%.
California's combined sales tax rate, including state and local taxes, is particularly high at the gas pump. Gasoline is taxed at $0.30 per gallon, while diesel is taxed at $0.13 per gallon. Alcohol products are also taxed differently: wine at $0.20 per gallon, beer at $0.20 per gallon, and liquor at $3.30 per gallon.
However, not all goods are taxed equally. Groceries and prescription drugs are exempt from sales tax, while clothing is taxable.
When it comes to property taxes, the average effective rate in California is 0.68%, but the median property taxes paid are over $5,000, making it one of the highest dollar amounts in the country. Home prices in California further contribute to its status as one of the most expensive places in the U.S. to own property.
California's individual state income tax is graduated, ranging from 1% to 13.3%. Some areas also collect local income tax. The person who pays the highest state income tax in California earns over $6 million, as California's top tax rate of 13.3% applies to all earnings above that amount.
Retirees in California should be aware that the state is one of the worst when it comes to taxes, with some retirees paying an income tax rate as high as 13.3%. Social Security is not taxable in California, but 401(k) and IRA Distributions, as well as pensions, are taxable.
However, California does offer some relief for eligible homeowners aged 62 or older, blind, or with a disability. The Property Tax Postponement program allows these homeowners to defer payment of their property taxes until the home is sold or transferred. Additionally, eligible California residents age 55 or older can transfer their home's "tax value" to a new home in the state through the Base Year Value Transfer program, with generally three transfers allowed per person.
Fire victims rebuilding their lives in California should also be aware of the steps to take to apply for federal assistance or insurance reimbursement, including reconstructing tax records. Wildfire victims are also granted tax deadline extensions for federal and state returns.
Lastly, it's important to note that there is no estate tax or inheritance tax in California.
In conclusion, while California's tax landscape can be complex, understanding the key points can help residents and visitors make informed decisions about their financial planning.
Read also:
- Deepwater Horizon Oil Spill: BP Faces Record-Breaking Settlement - Dubbed 'Largest Environmental Fine Ever Imposed'
- Lawsuit of Phenomenal Magnitude: FIFA under threat due to Diarra's verdict, accused of player injustice
- Expansion of railway systems, implementation of catenary systems, and combating fires: SNCF adapting to the summer heatwave
- Citizen Thekla Walker, Minister, advises: "Let's focus on our own homes first"
