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California State Tax

California State Tax

Introduction

California is one of the most populous states in the United States and is widely known for its high state taxes. California state tax is the tax that individuals, businesses, and corporations pay to the state of California. The state tax is the largest source of revenue for the state government and is used to fund public services like education, healthcare, and infrastructure. In this article, we will delve into the world of California state tax, its history, how it works, its rates, exemptions, and credits.

History of California State Tax

California has a long history of taxation, dating back to the Gold Rush era. During the Gold Rush, the California government imposed a tax on gold miners to fund public services. However, the current income tax system was created in 1935 when Franklin D. Roosevelt established a federal income tax. California adopted a similar tax system in the subsequent years. In 1955, the state adopted a sales tax, which has since been a significant source of revenue for the state.

How California State Tax Works

California state tax consists of various taxes, including income tax, sales tax, property tax, and business tax. Let’s take a closer look at each of these taxes.

Income Tax

California has a progressive income tax system. This means that those who earn more pay a higher percentage of their income in taxes. The state income tax has ten brackets, with rates ranging from 1% to 13.3%.

The income tax has a range of different credits and deductions that can be applied to reduce the amount owed. Some common credits and deductions available to California residents include:

– The Earned Income Tax Credit – a credit for low-income earners
– The Child and Dependent Care Credit – a credit for those who pay for childcare
– The California Young Child Tax Credit – a credit for families with young children

Sales Tax

California has a sales tax of 7.25%, but this can vary depending on the city or county. Because of additional local taxes, the total sales tax rate in some areas can reach up to 10.25%.

Property Tax

Property tax in California is based on the value of the property. It is calculated by multiplying the assessed value of the property by the tax rate, which is typically between 1% and 2%.

Business Tax

California charges a variety of taxes on businesses, including corporate tax, franchise tax, and employment tax. The California corporate tax rate is 8.84% of net income, while the franchise tax is 8.84% of net income or $800, whichever is greater. Employment taxes consist of state unemployment insurance tax (SUI) and employment training tax (ETT).

California State Tax Rates

As mentioned, California has a progressive income tax system, which means that as income increases, the tax rate also increases. Here are the tax rates for the 2021 tax year:

Individual Tax Rates:

– For incomes of up to $9,876, the rate is 1%
– For incomes between $9,877 and $21,622, the rate is 2%
– For incomes between $21,623 and $33,374, the rate is 4%
– For incomes between $33,375 and $46,394, the rate is 6%
– For incomes between $46,395 and $58624, the rate is 8%
– For incomes between $58,625 and $299,508, the rate is 9.3%
– For incomes between $299,509 and $359,407, the rate is 10.3%
– For incomes between $359,408 and $599,012, the rate is 11.3%
– For incomes between $599,013 and $1,000,000, the rate is 12.3%
– For incomes over $1,000,000, the rate is 13.3%

Married Filing Jointly Tax Rates:

– For incomes of up to $19,752, the rate is 1%
– For incomes between $19,753 and $43,244, the rate is 2%
– For incomes between $43,245 and $66,748, the rate is 4%
– For incomes between $66,749 and $92,788, the rate is 6%
– For incomes between $92,789 and $1,172,480, the rate is 8%
– For incomes between $1,172,481 and $599,016, the rate is 9.3%
– For incomes between $599,017 and $718,814, the rate is 10.3%
– For incomes between $718,815 and $1,198,024, the rate is 11.3%
– For incomes between $1,198,025 and $2,000,000, the rate is 12.3%
– For incomes over $2,000,000, the rate is 13.3%

Head of Household Tax Rates:

– For incomes of up to $14,658, the rate is 1%
– For incomes between $14,659 and $31,959, the rate is 2%
– For incomes between $31,960 and $49,012, the rate is 4%
– For incomes between $49,013 and $68,234, the rate is 6%
– For incomes between $68,235 and $87,542, the rate is 8%
– For incomes between $87,543 and $443,180, the rate is 9.3%
– For incomes between $443,181 and $532,504, the rate is 10.3%
– For incomes between $532,505 and $890,016, the rate is 11.3%
– For incomes between $890,017 and $1,000,000, the rate is 12.3%
– For incomes over $1,000,000, the rate is 13.3%

California State Tax Exemptions and Credits

Exemptions and credits available for California state tax include:

– Personal Exemptions – California doesn’t have personal exemptions.
– Standard Deduction – The California standard deduction starts at $4,601 for single filers. It increases to $9,202 for married couples filing jointly and $4,601 for married individuals filing separately.
– Dependent Credits – California offers a dependent credit of $367 per dependent.
– Earned Income Tax Credit – California offers the Earned Income Tax Credit for low-income earners. The credit can be up to $2,981 for families with one dependent, $6,728 for families with two dependents, and $8,053 for families with three or more dependents.
– Child and Dependent Care Credit – A credit of up to $1,050 is available for those who pay for childcare.
– California Young Child Tax Credit – A credit of up to $1,000 is available for families with young children.

California State Tax Forms

Individuals file their California state tax using Form 540. You can either download this form from the California Franchise Tax Board website or file it online. Businesses file their California state tax using Form 100, Form 100S, or Form 100W, depending on their type of business.

Conclusion

California state tax is an essential source of revenue for the state government to fund public services. For residents or businesses, understanding how state taxes work, the rates, exemptions, and credits can help to ensure compliance and minimize liability. California state tax rates are some of the highest in the US, with a progressive income tax system, and varies depending on the filer’s filing status. There are also various exemptions and credits available, such as the popular Earned Income Tax Credit and the California Young Child Tax Credit. It is important to always stay updated on California state tax laws to ensure that you are filing correctly and taking advantage of all the exemptions and credits available to you.


There are four major categories of California state tax. These are a California tax on income, a California tax on payroll, a California tax on sales, and a California state tax use, also known as an excise tax.

When confronted with the California tax on income, it is important to remember that California state tax is separate and distinct from the federal income tax. However, for the convenience of all those involved, the California tax on income follows the same filing deadlines as the Federal Income Tax program that is associated with the IRS. This means that the filing date for the income portion of an individual’s California state tax burden is April 15.

California Tax law for Payroll taxes requires businesses to file their payroll taxes each quarter. If the California tax is not filed and paid within a month, the business is then considered delinquent. Depending on the quarter, however, the due date may be the final date of the month in which they or due or the first of the following month, so it is important to check with the California state tax office.

The California tax on sales and on use are related concepts. While the sales tax applies to goods sold in the state, the use tax is charged on goods that are brought in other places for use in California. Use taxes are most commonly accrued from online purchases.