State Taxes at a Glance – California
| Type of Tax | 2023 |
|---|
| Individual Rates | 1.00% to 13.30% |
| Corporate / Business Tax Rates | 8.84% (flat tax) |
| Gross Receipts Tax | None |
| Property Taxes | 0.73% as a percentage of primary home |
| Sales Tax | 8.82% (average) |
| Estate or Inheritance Tax | None |
State Income Taxes in California
The state of California does have an individual income tax. Like most states with income tax, it is calculated on a marginal scale, with ten (10) tax brackets. They range from 1.00% to 13.30% (one of the highest in the country). The 13.30% tax bracket starts at $1 million and up.
State Business Taxes in California
The State of California has a multiple types of business taxes, Corporate Income Tax, Franchise Tax and an LLC Fee.
Corporate Income Tax – is assessed on C Corporations at a flat rate of 8.84% on all net income.
Franchise Tax – is assessed on other business entities (e.g., S-Corps, LLCs, LLPs, etc.)
- S Corporations have a Franchise tax of 1.5% on net income.
- LLCs and LLPs have a minimum Franchise Tax of $800
LLC Fee – in addition to the $800 franchise tax, LLCs must pay a Gross Receipts tax disguised as a fee. The LLC fee ranges between $900 and $11,790, depending on your Gross Receipts.
Note: flow-thru entities, such as S Corps, LLCs, and LLPs pay tax at the individual state tax rates of 1.00% to 13.30% depending on the bracket they are in.
Gross Receipts Tax – San Francisco
In November of 2020, the City of San Francisco approved Proposition F which modified certain taxes germane to the City of San Francisco
- Payroll Tax of 0.38% was removed
- Reduced the Business Registration Fee for business with Gross Receipts less than $1 Million
- Gross Receipt Tax on business whose Gross Receipts are over $2 Million
- Your Gross Receipt Tax is based on your business industry.
You may learn more about San Francisco’s Gross Receipt Tax here.
Sales and Property Taxes in California
Sales Taxes – like many states, California has multiple sales tax rates, one at the state level and another at the local level. The state rate is 7.25% the average local rate is 1.57% (total average rate for California Sales Tax is 8.82%).
Property Taxes in California – the average property tax rate for residential property in the state of California is 0.73%. This is artificially low due to the infamous Prop 13* which limits the increase of property taxes in California.
Prop 13 Real Estate Taxes
Prop 13 is a proposition that was signed into law back in 1978. It states that property taxes are based on the value of the property when that property is assessed by the state. An assessment is trigger when the property is transferred by death, gift, or resale. Therefore, some people who purchased their home in the 70s or 80s pay a much lower property tax than those that bought their home a few years ago. Please check with a Real Estate Tax Attorney in California before transferring title of your property to a loved one, LLC, or trust.
Mansion / Homeless Tax
Starting in April of 2023, the State of California instituted a new “Mansion-Tax” on the sale of all residential real estate of 4% for homes sold for more than $5 million. It is earmarked to help with the homelessness problem in the state.
Payroll taxes in California
Payroll (Unemployment Insurance) taxes are paid by business on the behalf of their employees to fund unemployment insurance to the state. It consists of multiple factors. Below is an outline of the most common ones in California –
- Wage Base – California’s wage base is $7,000 (which is low)
- New Employers – UI Contribution Tax is 3.40% for all new employers
- Employment Training – There is an additional 0.10% for ETT for all employees
- Disability – All employees must withhold and additional 1.00% for SDI for the first $122,909 of wages they make in California
- UI Rates – range from 1.60% to 6.20%
California DMV Registration Fees
California DMV fees are based on the value of your vehicle and is referred to as a Vehicle License Fee (VLF). They are calculated based on type of vehicle, city you live in, & purchase price. You may look up your VLF by license plate and VIN (vehicle id number).
California Domicile
The state of California presumes you’re a resident if you’ve spent more than 9 months there, in aggregate. However, for in-state (cheaper) tuition, California requires you to live in the state for 2-years.
State Tax on Social Security Benefits
Even though California has an income tax, social security benefits are not subject to state tax in “the Golden State.”
California Business Entities – LLCs
California has the highest LLC fees in the country. They are broken down into two components: a franchise tax, and an LLC fee. Here are some important facts:
- California LLC Franchise Tax is $800 annually
- California LLC Fee ranges from $900 to $11,790, based on your gross receipts
- When you register with the state, you pay a one-time fee of $90
- Secretary of State of California – click here