Is Social Security Taxed in California?
California leaves Social Security alone, even when the IRS taxes part of it. Most other retirement income is a different story.
No. California doesn't tax Social Security benefits at all: retirement, survivor or disability. Even when up to 85% of your benefits are taxable on your federal return, you subtract that amount on your California return. But California does tax most other retirement income, including pensions, IRA and 401(k) withdrawals and annuities, as ordinary income at rates up to 12.3%.
How the exclusion works on your return
California's Form 540 starts from your federal adjusted gross income, which includes the taxable part of your Social Security. On Schedule CA (540), you subtract that taxable amount, so it drops out of your California income entirely. You don't need to meet an age or income test, and it doesn't matter how much you receive.
The same applies to Railroad Retirement benefits, which federal law bars states from taxing, and to SSI and the State Supplementary Payment, which aren't taxable anywhere.
What California does tax
- Pensions from any employer, including CalPERS, CalSTRS and other public pensions, and out-of-state pensions you receive while living in California.
- Traditional IRA, 401(k), 403(b) and 457 withdrawals, including required minimum distributions.
- Annuities, except the part that returns what you paid in.
- Investment income: interest, dividends and capital gains, all at ordinary rates. California has no lower rate for long-term gains.
Roth IRA and Roth 401(k) withdrawals that are qualified are tax-free in California, as they are federally. Early withdrawals from a retirement plan before age 59 1/2 owe a 2.5% California additional tax on top of the federal 10% penalty, unless an exception applies.
Credits for seniors
California has no special pension exclusion based on age. Instead, filers 65 or older get a senior exemption credit of $153 on top of the $153 personal credit (twice each for a married couple who are both 65 or older), for tax year 2025. These credits phase out at higher incomes, starting at federal AGI above $252,203 for single filers.
A worked example
A single retiree, age 67, receives $30,000 a year in Social Security and a $40,000 pension, and has no other income. Using the 2025 figures:
- Social Security: $30,000, excluded in full.
- Pension: $40,000 minus the $5,706 standard deduction leaves $34,294 of taxable income.
- Tax from the brackets: $735.69.
- Minus the personal and senior credits ($306): $430 of California tax.
That's about 0.6% of their total income. If California taxed the Social Security like the pension, the bill would be about $2,222, or $1,792 more.
Military retirement pay
For a long time California was one of the few states that fully taxed military retirement pay. Starting with tax year 2025, qualified retirees can exclude up to $20,000 a year of retirement pay from the uniformed services, or a Survivor Benefit Plan annuity, if federal AGI is at or below $125,000 ($250,000 for joint filers). It's all-or-nothing: one dollar over the limit means no exclusion. The exclusion is set to run through tax year 2029.
Withholding and estimated tax
The Social Security Administration doesn't withhold California tax, but since the benefit isn't taxed, that doesn't matter. Pension and IRA payers can withhold California tax if you ask; use Form DE 4P for pensions and annuities. If nothing is withheld and you'll owe at least $500 for the year, you may need to make estimated payments to avoid a penalty.
If you move away
A federal law (4 U.S.C. 114) stops states from taxing retirement income of nonresidents. Once you've moved out of California and become a nonresident, California can't tax your pension or IRA withdrawals, even if you earned them working here. Our guide to moving out of California covers the year you move.
Run your numbers
Our California Retirement Income Tax Calculator works out the state tax on your pension, IRA withdrawals and other income, with Social Security excluded and the senior credits applied. The income tax calculator covers working-age filers.
Frequently Asked Questions
Does California tax Social Security?
No. California excludes all Social Security benefits from state income tax, including retirement, survivor and disability benefits, even if part of them is taxable on your federal return.
What retirement income does California tax?
Pensions (including CalPERS and CalSTRS), traditional IRA and 401(k) withdrawals, annuities and investment income are all taxed as ordinary income. Early withdrawals before age 59 1/2 also owe a 2.5% California additional tax on top of the federal 10%.
Does California tax military retirement pay?
Partly, starting in 2025. Qualifying retirees can exclude up to $20,000 a year of military retirement pay if federal AGI is at or below $125,000 ($250,000 for joint filers). The exclusion runs through tax year 2029.
Do I report Social Security on my California return?
It starts out included, because California's return begins with your federal AGI. You then subtract the taxable Social Security on Schedule CA (540), so none of it is taxed by the state.
Can California tax my pension if I move out of state?
No. Federal law bars states from taxing the retirement income of people who no longer live there, so once you are a nonresident, California can't tax your pension or IRA withdrawals. Payments you received while still a resident remain taxable.
This article is for general information only and is not tax advice. Check the Franchise Tax Board's current Form 540 instructions for your tax year.