California taxes most retirement income — pensions, traditional IRA and 401(k) withdrawals, investment income — at rates from 1% to 13.3%. Social Security is fully exempt. California has the highest top income tax rate in the US. On $100k retirement income (no SS), a California retiree might owe $7,000–$9,000 in state tax.
At a glance
Key Facts
Top Income Tax Rate
13.3% (12.3% + 1% mental health surcharge above $1M) — highest in the US
Social Security
Fully exempt from California state income tax at all income levels
Pensions / IRA / 401k
Fully taxed as ordinary income at state rates (1%–13.3%)
Standard Deduction (2026)
$5,706 (single); $11,412 (MFJ)
Military Retirement
$20,000 partial exclusion from 2025 for qualifying veterans
California Estate Tax
None — only federal estate tax applies
Introduction
California is the highest-income-tax state in the US, with a top marginal rate of 13.3% (9 brackets up to 12.3%, plus a 1% mental health surcharge on income over $1 million). For retirees, this is a significant consideration: while California does exempt Social Security benefits from state income tax — a meaningful carve-out — virtually all other retirement income is fully taxed at ordinary income rates. Pensions, traditional IRA withdrawals, 401(k) distributions, dividends, and capital gains are all taxed as if they were wage income.
The result: a California retiree with $120,000 in pension and IRA income might owe $10,000–$12,000 in California state income tax annually — every year of retirement. Over 20 years, that totals $200,000–$240,000 in state taxes alone. This guide covers exactly what California taxes, what is exempt, the 2026 brackets, worked examples at multiple income levels, and how California compares to lower-tax alternatives. Use the Retirement Income Tax by State Calculator to model your California bill and compare it to any other state.
Section 01
California's 2026 Income Tax Brackets
California has nine income tax brackets plus a 1% surcharge for income over $1 million. The brackets for 2026:
Taxable Income (Single)
Taxable Income (MFJ)
Rate
$0 – $10,756
$0 – $21,512
1%
$10,757 – $25,499
$21,513 – $50,998
2%
$25,500 – $40,245
$50,999 – $80,490
4%
$40,246 – $55,866
$80,491 – $111,732
6%
$55,867 – $70,606
$111,733 – $141,212
8%
$70,607 – $360,659
$141,213 – $721,318
9.3%
$360,660 – $432,787
$721,319 – $865,574
10.3%
$432,788 – $721,314
$865,575 – $1,442,628
11.3%
Over $721,314
Over $1,442,628
12.3%
Over $1,000,000
Over $1,000,000
+1% (13.3% effective)
Sources: California Franchise Tax Board. The standard deduction for 2026 is $5,706 (single) and $11,412 (MFJ). Most retirees with $80,000–$200,000 in total income will have a significant portion of their retirement distributions taxed at 9.3%.
Section 02
What California Exempts: Social Security
California's most significant concession for retirees is the full exemption of Social Security benefits. Unlike many other forms of retirement income, Social Security retirement, disability, and survivor benefits are completely exempt from California state income tax at all income levels — there is no phaseout, no income threshold above which benefits become taxable. This is confirmed by the California Franchise Tax Board.
For a retiree receiving $30,000 in Social Security annually, this exemption saves approximately $2,790 in California tax (at the 9.3% bracket). Railroad retirement (Tier 1) is also exempt under federal law.
What is NOT exempt in California:
Traditional IRA withdrawals
401(k) and 403(b) distributions
Pension income from private or most public sources
Investment income (dividends, capital gains)
Annuity payments (except the return-of-basis portion)
Section 03
California Military Retirement Exclusion (From 2025)
California introduced a partial military retirement income exclusion beginning in the 2025 tax year. Qualifying veterans can exclude up to $20,000 of military retirement pay from California state income tax. This is a significant change for California's large military veteran population — but note that it is a partial exclusion, not a full exemption. Military retirement income above $20,000 remains taxable in California.
Previously, California was one of the few states that taxed all military retirement income with no exemption. Other states with large military populations (Texas, Florida, Nevada, Georgia) either have no income tax or provide full military retirement exemptions.
Section 04
Worked Examples at Three Retirement Income Levels
The following examples use 2026 California brackets and standard deduction ($11,412 MFJ; $5,706 single). Social Security is excluded. Figures are approximate state income tax only.
The 2026 California Ballot Measure: What It Does and Doesn't Change
A 2026 ballot measure (Initiative #25-0041) — the California Retirement Savings Protection Act — proposes to amend the California Constitution to prohibit new taxes enacted after January 1, 2026 on retirement account balances, individual assets, and personal savings.
What this measure does NOT do: it does not eliminate the current California income tax on retirement account distributions. When you withdraw money from a traditional 401(k) or IRA, you still owe up to 13.3% California income tax on those withdrawals — that is an income tax on a distribution (income received), not a tax on the account balance itself. The ballot measure addresses hypothetical future wealth taxes, not the existing income tax on retirement distributions.
As of June 2026, the measure has not passed. Even if it does pass, it would not change what most California retirees currently owe in state income tax on their retirement income.
Section 06
Should You Leave California for Retirement?
The tax math on leaving California is straightforward: for a retiree with significant pension, IRA, or 401(k) income, the annual California income tax bill is real and recurring. A couple paying $11,000/year in California retirement income tax would save $11,000/year by moving to Texas, Florida, or Nevada. Over 20 years: $220,000 in direct tax savings.
Factors to weigh:
Social ties and healthcare: California has excellent healthcare infrastructure; proximity to family matters in later years
Property appreciation: California property values have historically appreciated faster than most states; Prop 13 means long-term homeowners have low taxable assessed values
Cost of living: Housing in no-tax states like Texas and Florida is often cheaper than California, adding to the financial benefit of moving
Domicile complexity: California is known for aggressive enforcement of domicile rules — to escape California tax, you must genuinely establish domicile elsewhere (driver's license, voter registration, primary residence)
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No. California fully exempts Social Security retirement, disability, and survivor benefits from state income tax at all income levels. There is no income phaseout or threshold above which Social Security becomes taxable in California — a rare fully unconditional exemption. Federal income tax on Social Security still applies depending on your combined income.
Q
Does California tax 401k and IRA withdrawals?
Yes. California taxes traditional 401(k) and IRA withdrawals as ordinary income at state rates from 1% to 13.3%, the same as wage income. There are no exemptions, exclusions, or retirement income deductions for 401k and IRA distributions in California (other than the military retirement exclusion for qualifying veterans). Roth IRA qualified distributions are tax-free since the contributions were made with after-tax money.
Q
What is California's highest income tax rate in 2026?
California's top income tax rate is 13.3% in 2026 — 12.3% applies to income above $721,314 (single) or $1,442,628 (MFJ), with an additional 1% mental health services tax on income above $1,000,000. For most retirees with income between $70,000 and $360,000, the applicable marginal rate is 9.3%. California has the highest top income tax rate of any US state.
Q
Does California tax pension income?
Yes. California taxes pension income — from private employers, government employers (with limited exceptions for federal civil service under certain conditions), and most other sources — at the same rates as ordinary income (1%–13.3%). California does not offer a general retirement income exclusion for pension income, unlike states such as Georgia ($65,000/person for those 65+) or Illinois (full pension exemption).
Q
What is the California military retirement exemption?
Beginning with the 2025 tax year, California allows qualifying veterans to exclude up to $20,000 of military retirement pay from California state income tax. Military retirement income above $20,000 remains taxable at California's ordinary income rates. This is a partial exclusion — not a full exemption. Compare this to Texas and Florida, where all military retirement income is untaxed because there is no state income tax.
Q
Is there a way to reduce California retirement income tax?
Strategies to reduce California retirement income tax include: Roth conversions before moving to a no-income-tax state (convert while still in a low-tax bracket before California applies its rates to the conversion); timing large withdrawals in lower-income years; maximising deductions; or establishing domicile in a no-income-tax state before taking large distributions. California aggressively enforces residency rules, so genuine domicile change is required — not just a mailing address.
Q
How does California compare to Texas or Nevada for retirement taxes?
California taxes most retirement income at up to 13.3%; Texas and Nevada have no income tax at all — saving a retiree with $100,000 in pension/IRA income potentially $8,000–$10,000 per year in state taxes. Over 20 years, that difference compounds to $160,000–$200,000. The trade-off: Texas has high property taxes (~1.63% average) and Nevada has no income tax but modest services. Use the Retirement Income Tax by State Calculator to compare states with your specific figures.
Q
Will the 2026 California ballot measure eliminate retirement income tax?
No. The 2026 California Retirement Savings Protection Act ballot measure proposes to ban new taxes on retirement account balances — meaning hypothetical future wealth taxes. It does NOT eliminate the existing California income tax on retirement distributions (401k withdrawals, IRA distributions, pension income). Even if passed, you would still owe California income tax on money withdrawn from pre-tax retirement accounts.
Disclaimer:This guide is for educational purposes only and does not constitute tax advice. Tax laws are complex and subject to change. Figures are based on information available as of June 2026. Always verify current rates with the California Franchise Tax Board (ftb.ca.gov) and consult a qualified tax professional for advice specific to your situation.