California Tax Rates 2025: What Homeowners & Investors Need to Know

Let’s be honest—taxes in California aren’t exactly light reading. Whether you’re buying your first home, refinancing your mortgage, or investing in real estate, understanding how California tax rates impact your bottom line can make a huge difference.

As a local mortgage expert, I’ve walked countless homeowners through these questions—and I’m here to do the same for you. This 2025 guide breaks down everything from California property tax rules to income brackets, capital gains, and how to make smarter tax-informed home financing decisions. Let’s dig in.

California Income Tax Rates (2024)

California uses a progressive income tax system, meaning the more you earn, the higher your rate. There are nine brackets, and for 2024, rates range from 1% to 13.3%—the highest in the nation.

Progressive State Income Tax Brackets

Here's a quick look at the brackets for single filers (married couples file slightly differently):

• 1% on income up to $10,099
  
• 2% on $10,100 – $23,942
  
• 4% on $23,943 – $37,788
  
• 6% on $37,789 – $52,455
  
• 8% on $52,456 – $66,295
  
• 9.3% on $66,296 – $338,639
  
• 10.3% on $338,640 – $406,364
  
• 11.3% on $406,365 – $677,275
  
• 12.3% on $677,276+
  
• +1% “Mental Health Services” surcharge for income over $1 million
  

Yes, you read that right—California adds a 1% surtax on millionaire income to fund mental health programs. It’s officially called the Mental Health Services Act (MHSA).

California Sales Tax Rates

California has the highest state sales tax rate in the country, but the local add-ons vary depending on where you live.

• Statewide Base Rate: 7.25%
  
• Average Local Add-Ons: 1.5–2.5%
  

Let’s break it down by major counties:

• Los Angeles County: 9.5%
  
• San Francisco: 8.625%
  
• San Diego: 7.75%
  

If you’re planning major purchases like furniture or renovations after buying a home, this is something to keep in mind.

California Property Taxes

Here’s some good news: While income and sales taxes may be high, California property tax rates are actually lower than the national average—thanks to Proposition 13.

Average Effective Rate

The typical property tax in California is about 0.73% of your home’s assessed value.

Highest/Lowest Counties

• Lowest: Modoc, Alpine, and Lassen counties (under 0.60%)
  
• Highest: Kern and Riverside counties (over 1.10%)
  

Keep in mind that the assessed value under Prop 13 is based on your purchase price and increases only 2% per year, unless there’s a sale or major remodel.

Special Taxes for Homeowners & Investors

Mello-Roos Taxes

Many newer developments and master-planned communities in California charge Mello-Roos taxes to fund local infrastructure (schools, parks, roads). These can add thousands per year to your property tax bill. Always check your property’s supplemental tax disclosures.

Proposition 19 Rules

Passed in 2020 and fully active now, Prop 19 allows homeowners over 55 to transfer their tax base when buying a new home, but it also tightened rules around inherited homes. If you're passing property to heirs, it may now trigger a reassessment—which can dramatically increase taxes.

How Taxes Impact Mortgage Planning

This is where things get really important for buyers and homeowners.

Are Mortgage-Related Taxes Deductible?

• Mortgage interest is deductible for most primary and some secondary homes
  
• Property taxes are deductible, but capped at $10,000 under federal SALT limits
  
• Home equity loan interest is deductible only if used for home improvements
  

Tax-Smart Financing Strategies

We help clients explore mortgage options that keep more money in your pocket:

• Choosing between 15-year vs. 30-year terms for tax efficiency
  
• Using a cash-out refinance to fund tax-deductible renovations
  
• Leveraging tax deductions in your refinance decision-making
  

Smart Tax Planning for Homebuyers

Tax planning isn’t just for April—it should be part of your home financing strategy from the beginning.

At Equity Capital, we provide:

• Free Tax Impact Analysis before you close
  
• First-time buyer tax credit guidance
  
• Optimized loan structures based on your income and deduction limits
  

We work closely with CPAs and financial advisors, so you don’t just buy a home—you buy smarter.

Buy Smarter With Tax-Aware Financing!

The truth is, California’s tax environment is complex—but with the right guidance, it doesn’t have to be confusing. Whether you're buying, refinancing, or investing, understanding the tax implications can save you thousands over time.

Want to know how your tax picture changes when you buy or refinance? Let’s talk. We’re here to guide you through it, step by step.

FAQs

1. What's California's highest income tax rate?‍

The top rate is 13.3%, including the 1% mental health surcharge on income over $1 million.

2. Are property taxes deductible in CA?‍

Yes, but federal law caps the deduction at $10,000 under the SALT limit.

3. What county has the lowest property taxes?

‍Modoc County often reports some of the lowest effective property tax rates in California.

4. How often can property taxes increase?‍

Thanks to Prop 13, assessed values can only rise 2% per year, unless the property changes hands.

5. Do renters pay sales tax on rent?‍

No, rent itself is not subject to sales tax in California.

6. What's the sales tax on cars in California?‍

You’ll pay state sales tax plus your local rate, which can be up to 10.25% in some areas.

7. Can I deduct home equity loan interest?‍

Yes—but only if the loan was used to buy, build, or substantially improve your home.

8. How does Prop 19 affect inherited homes?‍

In most cases, inherited properties are now reassessed to market value, unless the heir moves in and meets certain criteria.

9. What triggers a property tax reassessment?‍

Reassessments occur when you sell, transfer ownership, or significantly remodel your home.

10. Why consult Equity Capital about tax implications?‍

Because we do more than mortgages—we help you plan smarter. Our tax-aware loan strategies are designed to maximize your savings, long after the ink is dry.

Got tax questions? We’ve got you. Reach out to Equity Capital Home Loans today for a free consultation and get one step closer to a financially optimized homeownership journey.