Income Tax Brackets: California State

Income Tax Brackets: California State (Definitive Guide)

Paying income tax is never a pleasant experience, but California is especially tough. Not only do you have to deal with the state’s highest marginal rate of 13.3%, but also the most complex set of brackets and exemptions that can leave you scratching your head.

It doesn’t help that California law requires every taxpayer to file an annual return of their federal adjusted gross income (AGI) plus any adjustments made for special items on page 1 of their 1040 form.

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This means they’re not just filing taxes once per year–they may be required to submit quarterly estimates as well, which are due by January 31, April 30, July 31, and October 31–or else incur penalties and interest charges if they don’t pay enough or are late.

What is the Franchise Tax Board?

The Franchise Tax Board (FTB) is a state agency with administrative powers to collect taxes from corporations and most individuals. The FTB also has the authority to audit most businesses, withholding and employer’s quarterly tax returns. In addition, the FTB operates several types of volunteer programs that aim to help taxpayers comply with their filing requirements.

Who needs to file?

Everybody who lives in California for a “particular” period over a consecutive 12-month period is considered a California resident for that year–and therefore files a resident return–regardless of where he or she claims residency on his/her federal income tax return.

The majority of people are considered residents; however, there are some exceptions, including nonresidents employed by the California government, military personnel on active duty, and most students.

California has nine state income tax brackets, ranging from 1% to 13.3%. On top of that, there’s a 1.5% surcharge for taxpayers whose adjusted gross income is more than $1 million (single) or $2 million (married filing jointly).

How Is Income Tax Calculated in California?

The first step is determining a taxpayer’s “net” or “adjusted” California taxable income. This includes federal taxable income, plus or minus certain additions and subtractions, which gives you an amount taxed at different rates depending on the bracket.

To figure out your taxable income for each tax bracket, use this online tax calculator .

Net Taxable Income = Federal AGI + Adjustments – Personal Exemptions – Dependent Deductions

California has nine tax brackets with marginal rates from 1% to 13.3%. In other words, there are nine levels of income at which point a new bracket begins:

  • 1% on the first $7,515 of taxable income
  • 2% on all income between $7,515 and $29,030
  • 3% on all income between $29,030 and $44,055
  • 4% on all income between $44,055 and $59,670
  • 5% on all income between $59,670 and $84,995
  • 6% on all income between $84,995 and $108,910
  • 7% on all income between $108,910 and $134,615
  • 8% on all income between $134,615 and $162,415
  • 9% on all income over $162,415

The exact Tax income brackets in California are as follows:

Single/Married Filing Separate – 3 Brackets

  • Below $16,029 ($33,999 for Married Filing Separate) — 0% Tax Bracket
  • $16,029 up to $38,002 ($77,132 for Married Filing Separate)– 7.60% Tax Bracket
  • Over 38,002 ($77,132 for Married Filing Separate)– 9.3% Tax Bracket

Single/Married Filing Jointly or Widower– 5 Brackets

  • Below 16,030 ($34,000 for married filing jointly or qualifying widow or widower)– 0% tax bracket
  • 16,030 up to $44,177 ($88,354 for Married Filing Jointly or qualifying widow or widower)– 7.60% tax bracket
  • Over 44,177 ($88,354 for Married Filing Jointly or qualifying widow or widower)– 9.30% tax bracket
  • Over 84,359 ($176,708 for married filing jointly or qualifying widow or widower)– 12.20% tax bracket
  • Over 199,411($399,821for married filing jointly or qualifying widow or widower)– 13.30% Tax Bracket

Head of Household – 3 Brackets

  • Below $18,611 ($37,799 for Head of Household)– 0% tax bracket
  • $18,611 up to $44,377 ($90,753 for Head of Household)– 7.60% tax bracket
  • Over 44,377($90,753 for Head of household)– 9.30% tax bracket

Married Filing Separate – 6 Brackets

  • Below $16,000 ($33,999 for MFJ or qualifying Widow/Widower)– 0% Tax Bracket
  • 16,000 up to 22,499–5.00% Tax Bracket
  • 22,500 up to 37,499–7.50% Tax Bracket
  • 37,500 up to 47,499–10.00% Tax Bracket
  • 47,500 up to 58,999–12.50% tax bracket
  • Over 58,999 ($117,198 for MFJ or qualifying Widow/Widower)– 13.30% Tax Bracket

It’s important to note that in California, special rules apply when you and your spouse file a joint return and one spouse has no income (for example, a stay-at-home spouse). In this case, the non-income-earning spouse is typically taxed at the lowest rate possible based on the number of exemptions they qualify for.

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If you use the standard deduction, you will need to complete a worksheet that determines your taxable income and then figure out your tax based on those numbers.

What is Included in California Taxable Income?

  • California’s taxable income is its AGI plus any extra items not deducted on the federal return, including:
  • Foreign and possession tax credits (Form 1116),
  • Exempt foreign trade income (Schedule EIC),
  • Interest received by individuals in the Philippines (Schedule B interest and dividends),
  • Other interest received or accrued by an individual if it is shown on that individual’s return of federal income tax,
  • Ordinary dividends of taxpayers under 65 years old,
  • Capital gain distributions from regulated investment companies (mutual funds),
  • Distributions of net capital gains from estates or trusts,
  • Distributions of qualified dividends from estates or trusts,
  • Distributions of net income from estates or trusts,
  • Taxable distributions from Coverdell education savings accounts (ESAs),
  • Taxable distributions from Archer MSAs

How to File Your California Income Tax Return

You have a few different options for filing your California income tax return:

1. e-file using CalFile,

2. File a paper return, or

3. use a paid preparer.

If you choose to file a paper return, you can download the forms from the California Franchise Tax Board’s website. The instructions are also available on the website and include examples to help you through the process.

You can also file your California income tax return electronically using CalFile. This is a free service offered by the state and is available to taxpayers who have simple returns. You will need to have your social security number, dates of birth for you and your spouse (if applicable), and total income from all sources (not just taxable income). You can download the forms from the California Franchise Tax Board’s website.

When using an online service like CalFile, you will need to know which tax year you are filing for (the latest tax year you were required to file is 2021 for calendar year filers), your adjusted gross income (from your federal return), and any other relevant information. In addition, the program will automatically fill in your social security number, date of birth, etc., if they are already on file with the state.

CalFile is easy to use and only takes about 10-15 minutes. However, it does not allow for a change in math errors made on a prior-filed return, nor does it allow for refunds/payments with a credit card or debit card.

Underpayment and Penalties For Tax In California

If you don’t pay enough tax during the year, you may pay the penalty. This is known as the “underpayment of the estimated tax penalty.” The penalty is usually 0.5% of the underpaid amount for each month (or part of a month) that the tax is not paid. However, the penalty cannot be more than 25% of the total amount that should have been paid.

There are a few exceptions to this rule, including:

  • You had no tax liability in the previous year,
  • You had federal income tax withheld from your wages or made payments through payroll deduction,
  • You qualify for the safe harbor rule (see below), or
  • You file your return on time but do not pay the amount due in full by the filing deadline (April 15).

The penalty is figured separately for each payment period. This means that any unpaid tax at the end of your first tax year can be applied to your second-year estimated taxes.

You may want to avoid the underpayment penalty if you are in one of these situations:

  • You have capital gains or losses during the year,
  • You have self-employment income,
  • You owe alternative minimum tax,
  • You expect a large refund from your federal return,
  • You owe other state estimated taxes.
  • The safe harbor rule allows taxpayers who do not have sufficient withholding or cannot make estimated payments to avoid the underpayment penalty.

Conclusion

There you go, some basic information on how to go about filing your California income tax. As always, if you have any questions, the Franchise Tax Board website should be able to help you out.

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