California Capital Gains Tax Explained
California has no separate capital gains tax. Gains are added to your income and taxed at the same rates as wages, which is why a big sale can land in the top bracket.
California taxes capital gains as ordinary income. There's no lower rate for long-term gains: a gain is added to your wages and other income and taxed at the regular rates, from 1% up to 12.3%, plus a 1% surcharge on taxable income over $1,000,000. That makes the top rate on a large gain 13.3%, on top of federal capital gains tax.
How California taxes a gain
At the federal level, long-term gains get their own rates of 0%, 15% or 20%. California doesn't have them. The Franchise Tax Board treats every gain, short-term or long-term, as part of your taxable income. The practical effect is that the gain is taxed at your top rate, and a big one can push you into higher brackets.
These are the 2025 rates for single filers. Married couples filing jointly have brackets twice as wide, but the 1% surcharge starts at $1,000,000 for everyone.
| Taxable income (single) | Rate |
|---|---|
| $0 to $11,079 | 1% |
| $11,079 to $26,264 | 2% |
| $26,264 to $41,452 | 4% |
| $41,452 to $57,542 | 6% |
| $57,542 to $72,724 | 8% |
| $72,724 to $371,479 | 9.3% |
| $371,479 to $445,771 | 10.3% |
| $445,771 to $742,953 | 11.3% |
| Over $742,953 | 12.3% |
| Over $1,000,000 (surcharge) | +1% |
A worked example
A single filer earns $90,000 in wages and sells stock or property for a gain. Here is the extra California tax the gain adds, using the 2025 brackets and standard deduction:
| Capital gain | Extra California tax | Effective rate on the gain |
|---|---|---|
| $10,000 | $930 | 9.3% |
| $60,000 | $5,580 | 9.3% |
| $250,000 | $23,250 | 9.3% |
| $1,500,000 | $177,270 | 11.8% |
Small gains are taxed at the filer's current rate. The larger ones climb through the 10.3%, 11.3% and 12.3% brackets, and the part of taxable income over $1,000,000 also pays the 1% surcharge. Holding the asset longer than a year doesn't change any of this.
Selling your home
California follows the federal home sale exclusion. If you owned the home and lived in it as your main home for at least two of the five years before the sale, you can exclude up to $250,000 of gain, or $500,000 if you're married filing jointly. Gain above that is taxed as ordinary income. Improvements you made add to your cost basis and reduce the gain, so keep the receipts.
For rental or investment property, depreciation you claimed reduces your basis and increases the taxable gain. When you sell California real estate, the escrow company generally withholds 3 1/3% of the sale price for the Franchise Tax Board unless an exemption applies, such as the sale of a principal residence. The withholding is a prepayment, not the final tax.
Losses and carryovers
Capital losses offset capital gains first. If losses are larger, up to $3,000 of the net loss can offset other income each year, and the rest carries forward. The rules match the federal ones, but your California carryover can differ if some of your federal gains or losses were treated differently by the state.
Where California departs from federal rules
- Qualified small business stock. California doesn't allow the federal Section 1202 exclusion, so gains on founder or early-employee stock that are tax-free federally are taxed in full.
- Opportunity Zones. California doesn't follow the federal deferral and exclusion for gains invested in Qualified Opportunity Funds.
- 1031 exchanges. California allows like-kind exchanges of real property, but if you swap California property for property in another state, you must file an annual information return, and California taxes the deferred gain when you sell the replacement property.
- No net investment income tax. The 3.8% federal tax on investment income has no California version.
Timing and estimated tax
Because the tax on a large gain can be significant, you may owe estimated tax for the quarter of the sale. California's estimated tax schedule is front-loaded, with 30% due in April and 40% in June, so a gain early in the year needs attention sooner. Our estimated tax schedule guide explains the safe harbors.
Run your numbers
Our California Capital Gains Tax Calculator works out the state tax on a gain with your other income, filing status and any losses. The income tax calculator shows your full California bill.
Frequently Asked Questions
What is the capital gains tax rate in California?
There's no separate rate. California adds capital gains to your other income and taxes them at the regular rates, from 1% to 12.3%, plus a 1% surcharge on taxable income over $1,000,000. The top combined rate is 13.3%.
Does California tax long-term capital gains differently?
No. Unlike the federal government, California treats short-term and long-term gains the same, and qualified dividends are taxed like other income too.
Do I pay California tax when I sell my house?
Only on the gain above the exclusion. If you owned and lived in the home for at least two of the last five years, California follows the federal rule and excludes up to $250,000 of gain ($500,000 for married couples filing jointly). Any gain above that is taxed as ordinary income.
Can capital losses reduce my California tax?
Yes. Losses offset gains first, and up to $3,000 of net loss a year can offset other income, with the rest carried forward, the same as the federal rule.
Do I owe California tax on gains if I move out of the state?
It depends on when the gain is realized. Gains on sales after you become a nonresident generally aren't taxed by California, except gains on California real estate or other California-source property. Installment payments and some stock compensation can stay taxable after a move.
This article is for general information only and is not tax advice. Talk to a tax professional before a large sale.