As a long-time Los Angeles Financial advisor who does a ton of tax planning for my clients, I’d be willing to bet most people in CA have yet to learn the California capital gains rates. Keep reading to determine how much California will tax your investment gains.
Tax planning is essential for high income California Residents.
By David Rae Certified Financial Planner™, Accredited Investment Fiduciary™
With more than 40 million people officially living in California, the great weather, beautiful beaches and mountains, Palm Springs must be doing something right. The hurdles to being financially successful in this state are high. California has one of the highest living costs in the US and is among the highest income tax states. Taxation of capital gains in California is no less well-taxing on investors’ budgets. The more taxes you pay, the harder it will be for you to build wealth.
California taxes all capital gains as regular income. If you live in California, you could get hit with surprisingly large tax bills on your investment accounts.
In contrast, the Federal Government will differentiate between long-term capital gains and short-term capital gains for tax purposes. Capital gains tax rates range from zero-percent up to 37%, depending on the type of capital gains being taxed. It has been my experience as a Los Angeles financial planner; many people ignore state capital gains taxes when doing their tax planning (that is, assuming they are doing any tax planning at all). Understanding California capital gains tax rate obligations can help you make proactive money moves to minimize your taxes owed to the Franchise Tax Board.
How Does California Tax Capital Gains?
Simply put, California taxes all capital gains as regular income. It does not recognize the distinction between short-term and long-term capital gains. This means your capital gains taxes will run between 1% up to 13.3%, depending on your overall income and corresponding California tax bracket.
How California taxes capital gains make it imperative that your work with a fabulous financial planner to do proactive tax planning.
Determining Your 2024 California Income Tax Rates
California taxpayers are subject to nice progress marginal tax rate brackets. The tax brackets in California range from a low of just 1% to a high of 12.3%. Being a progressive state with a progressive income tax system, there is an additional 1% tax on incomes above $698,272, if you file as single. This is a Mental Health Services surtax that isn’t included in the marginal tax rate schedule.
Your state tax-filing status and the overall amount of income you earned for the year determine at which rate you will be taxed. With California not giving any tax breaks for capital gains, you could find yourself getting hit with a total state tax rate of 13.3% on your capital gains. This is often a surprise to the tech millionaires working at companies like Tesla TSLA -1% TSLA -1%, Apple AAPL +0.2% AAPL +0.2%, Airbnb, or even SpaceX with substantial stock options.
I am a huge fan of tax planning and tax loss harvesting. Employing tax-saving strategies is imperative for a resident of California with a “high” income. I am putting quotes around high because you get hit with a 9.3% capital gains tax at just $68,351 of income if you are single. That’s hardly enough income to call yourself “rich.”
Federal Capital Gains Tax Brackets 2024
Single
- 0 percent: $0 to $47,025
- 15 percent: $47,025-$518,900
- 20 percent: $518,991 or more
Married Filing Jointly
- 0 percent: $0 to $94,050
- 15 percent: $94,051-$583,750
- 20 percent: $583,751 or more
California State Tax rates And California Tax Brackets
California Tax Brackets for Single Taxpayers
Single:
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 1% | $0 to $10,412. | 1% of taxable income. |
| 2% | $10,413 to $24,684. | $104.12 plus 2% of the amount over $10,412. |
| 4% | $24,685 to $38,959. | $389.56 plus 4% of the amount over $24,684. |
| 6% | $38,960 to $54,081. | $960.56 plus 6% of the amount over $38,959. |
| 8% | $54,082 to $68,350. | $1,867.88 plus 8% of the amount over $54,081. |
| 9.3% | $68,351 to $349,137. | $3,009.40 plus 9.3% of the amount over $68,350. |
| 10.3% | $349,138 to $418,961. | $29,122.59 plus 10.3% of the amount over $349,137. |
| 11.3% | $418,962 to $698,271. | $36,314.46 plus 11.3% of the amount over $418,961. |
| 12.3% | $698,272 or more. | $67,876.49 plus 12.3% of the amount over $698,271. |
Single 2021 Number For Comparison
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 1% | $0 to $9. | 1% of taxable income. |
| 2% | $9,326 to $22,107. | $93.25 plus 2% of the amount over $9,325. |
| 4% | $22,108 to $34,892. | $348.89 plus 4% of the amount over $22,107. |
| 6% | $34,893 to $48,435. | $860.29 plus 6% of the amount over $34,892. |
| 8% | $48,436 to $61,214. | $1,672.87 plus 8% of the amount over $48,435. |
| 9.3% | $61,215 to $312,686. | $2,695.19 plus 9.3% of the amount over $61,214. |
| 10.3% | $312,687 to $375,221. | $26,082.09 plus 10.3% of the amount over $312,686. |
| 11.3% | $375,222 to $625,369. | $32,523.20 plus 11.3% of the amount over $375,221. |
| 12.3% | $625,370 or more. | $60,789.92 plus 12.3% of the amount over $625,369. |
California Tax Brackets for Married/Registered Domestic Partner (RDP) Filing Jointly Taxpayers (and Qualifying Widowers)
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 1% | $0 to $20,824. | 1% of taxable income. |
| 2% | $20,825 to $49,368. | $208.24 plus 2% of the amount over $20,824. |
| 4% | $49,369 to $77,918. | $779.12 plus 4% of the amount over $49,368. |
| 6% | $77,919 to $108,162. | $1,921.12 plus 6% of the amount over $77,918. |
| 8% | $108,163 to $136,700. | $3,735.76 plus 8% of the amount over $108,162. |
| 9.3% | $136,701 to $698,274. | $6,018.80 plus 9.3% of the amount over $136,700. |
| 10.3% | $698,275 to $837,922. | $58,245.18 plus 10.3% of the amount over $698,274. |
| 11.3% | $837,923 to $1,396,542. | $72,628.92 plus 11.3% of the amount over $837,922. |
| 12.3% | $1,369,543 or more. | $135,752.98 plus 12.3% of the amount over $1,396,542. |
Single 2021 California Tax Brackets For Comparison
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 1% | $0 to $18,650. | 1% of taxable income. |
| 2% | $18,651 to $44,214. | $186.50 plus 2% of the amount over $18,650. |
| 4% | $44,215 to $69,784. | $697.78 plus 4% of the amount over $44,214. |
| 6% | $69,785 to $96,870. | $1,720.58 plus 6% of the amount over $69,784. |
| 8% | $96,871 to $122,428. | $3,345.74 plus 8% of the amount over $96,870. |
| 9.3% | $122,429 to $625,372. | $5,390.38 plus 9.3% of the amount over $122,428. |
| 10.3% | $625,373 to $750,442. | $52,164.17 plus 10.3% of the amount over $625,372. |
| 11.3% | $750,443 to $1,250,738. | $65,046.38 plus 11.3% of the amount over $750,442. |
| 12.3% | $1,250,739 or more. | $121,579.83 plus 12.3% of the amount over $1,250,738. |
Bottom Line On Califonia Capital Gains Tax Rates:
For other the California Income Tax Rate for other filing status visit the Franchise Tax Board site.
With the stock market soaring to record highs in 2023 and setting new records in 2024, many Californians earning high incomes- even during the COVID Recession- tax planning is a must. Work with your fee-only financial planner to develop a plan to help minimize your federal and California state taxes.
Go even more fabulous and work with a LGBTQ Financial Advisor, why not make building wealth fun?
The bottom line capital gains are subject to California’s regular income tax brackets, which can add to your overall tax burden each year, if your Los Angeles financial advisor doesn’t offer tax planning guidance. Or worse, don’t take into account taxes when managing your investments and retirement accounts.
If you work in tech, start tax planning for your Equity Compensation in April. The cost of ignoring proactive tax strategies can be too high, especially here in California.
DAVID RAE, CFP®, AIF® is a Los Angeles-based financial planner with DRM Wealth Management, a regular contributor to Advocate Magazine, Huffington Post, and Forbes, not to mention numerous TV appearances. He helps intelligent people across the USA achieve their financial goals. For more information, visit his website at www.davidraefp.com
Connect With David Rae, Financial Planner LA
David Rae, CFP® AIF®
President / Founder DRM Wealth Management LLC
1(323) 905-4380
david.rae@financialplannerla.com
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