2025 tax guide

California Tax (2025)

How to calculate California income tax from wage income, deductions, exemption credits, brackets, and the 1% high-income surtax.

Educational use only. This guide is for general educational purposes and is not financial, tax, legal, or accounting advice. Tax rules can change and individual facts matter. Verify the information with official sources and a qualified professional before making tax or financial decisions.

1. California Income Base

California does not deduct HSA contributions; HSA amounts remain taxable for California income tax.

Net business income, each business's earnings less its expenses, is regular California income and is figured the same way as for the federal return. A net loss reduces income.

Add taxable income and subtract eligible pre-tax payroll deductions:

California Income Base = Total Gross Wages + Dividends And Taxable Interest + Short‑Term Capital Gain +
              Long‑Term Capital Gain + Taxable Retirement Distribution + Net Business Income -
              Pre‑Tax Medical - Pre‑Tax 401(k) - Pre‑Tax FSA

2. California Standard Deduction

Use this table to find the 2025 California standard deduction by filing status:

Filing Status	2025 California Standard Deduction
Single	$5,706
Married filing jointly	$11,412
Married filing separately	$5,706
Head of household	$11,412

3. California Itemized Deduction

California itemizing covers qualified medical expenses, property taxes, mortgage interest, and charitable contributions. State income taxes, SDI, VPDI, and general sales taxes are excluded. California does not apply the federal SALT cap.

Calculate the medical expenses allowed after the federal income floor:

California Medical Deduction = MAX(0, Qualified Unreimbursed Expenses - 7.5% Of Federal AGI)

Limit California mortgage interest using the eligible debt balance. A home equity loan or HELOC whose proceeds buy, build, or substantially improve the securing home counts toward the combined balance and interest, using the same formulas as the federal calculation:

California Deductible Mortgage Interest = Combined Qualified Interest × MIN(1, California Acquisition‑Debt Limit ÷
                Combined Qualified Average Balance)

Add California itemized deductions before applying the income limit:

California Pre‑Limit Deduction = California Medical Deduction + Property Tax Paid +
                California Deductible Mortgage Interest +
                Allowable Charitable Contribution Deduction

Add deductions that are subject to California's high-income limit:

Covered Unprotected Deductions = Property Tax Paid + California Deductible Mortgage Interest

Measure California income above the itemized-deduction threshold:

High‑Income Excess = MAX(0, California Income Base - California Itemized‑Limit Threshold)

Use the smaller income-based amount to reduce California itemized deductions:

Itemized Reduction = MIN(80% Of Covered Unprotected Deductions, 6% Of High‑Income Excess)

Subtract the income-based reduction from the preliminary itemized deduction:

California Itemized Deduction = California Pre‑Limit Deduction - Itemized Reduction

Subtract the selected California deduction, the larger of the California standard and itemized deductions chosen independently of the federal return, from the California income base:

California Taxable Income = MAX(0, California Income Base - Selected California Deduction)

California applies separate acquisition-debt and home-equity debt limits. The itemized deduction limit also depends on filing status.

Use this table to find California debt limits and the itemized-deduction threshold:

Filing Status	California Acquisition-Debt Limit	California Home-Equity Debt Limit	California Itemized-Limit Threshold
Single	$1,000,000	$100,000	$252,203
Married filing jointly	$1,000,000	$100,000	$504,411
Married filing separately	$500,000	$50,000	$252,203
Head of household	$1,000,000	$100,000	$378,310

4. Early Retirement Distribution Tax

California taxes a retirement distribution as regular income. An early distribution taken before age 59½ also owes California's 2.5% additional tax, unless an exception applies. California generally follows the federal exceptions, and exemption credits do not reduce this tax.

Apply the additional tax when no exception applies:

Early Distribution Tax = Taxable Retirement Distribution × 2.5%, Or $0 When An Exception Applies

5. Brackets, Surtax, and Credits

Use the same bracket table shown for 2026 because the public source values for California brackets are unchanged between these two years.

Add the California tax from every taxable bracket slice:

California Bracket Tax = SUM(All Taxable Slices × Each Slice's Rate)

Apply California's mental-health surtax to income above one million dollars:

Mental Health Services Tax = MAX(0, California Taxable Income - $1,000,000) × 1%

Add the base and dependent California exemption credits:

Exemption Credits = Base Exemption Credit + Dependents × $475

Combine California bracket tax and surtax, subtract exemption credits, then add the early distribution tax:

California Income Tax = MAX(0, Bracket Tax + Mental Health Services Tax - Exemption Credits) +
                Early Distribution Tax

Use this table to find the 2025 California exemption credit amounts:

Credit	Amount
Single, married filing separately, head of household	$153
Married filing jointly	$306
Dependent exemption credit	$475 per dependent