State retirement tax · California
Retirement tax rules for California residents (2026 guide)
California taxes pensions, 401(k) and IRA withdrawals as ordinary income at rates up to 13.3%, but leaves Social Security alone. Two things soften it for retirees: a new $20,000 military retirement exclusion (2025–2029) and property-tax rules — Proposition 13 and Proposition 19 — that reward staying put or downsizing within the state.
By Mindaugas Laucius · Last reviewed October 21, 2026
Rate on retirement income
6.00%
Taxes Social Security?
No
Approx. tax on $90k retirement income
$3,600
Pension carve-outs
Yes
Quick figures: a single filer with $90,000 of income, $30,000 of it Social Security.
Income tax
Social Security is fully exempt. Everything else — public and private pensions, IRA and 401(k) withdrawals, annuities, interest and capital gains — is taxed under the nine-bracket schedule from 1% to 13.3%. California doesn't follow the federal senior deductions, so the state taxable amount is often higher than the federal one.
From tax year 2025 through 2029, military retirees and Survivor Benefit Plan recipients can exclude up to $20,000 a year if AGI is $125,000 or less (single) or $250,000 or less (joint).
Property tax: Prop 13 and Prop 19
Proposition 13 sets the basic levy at 1% of assessed value plus voter-approved debt, and limits assessment increases to 2% a year until the home sells — long-time owners pay far less than new buyers. Proposition 19 lets homeowners 55 and older move their low assessed value to a replacement home anywhere in California, up to three times.
Sales tax
The statewide base rate is 7.25%, and local add-ons push many cities past 9%.
Worked examples
Downsizing under Prop 19
- Sell a home with a $400,000 assessed value for $1.2 million; buy a $1.0 million replacement.
- The replacement costs no more than the sale price, so the $400,000 assessed value carries over.
- 1% × $400,000 ≈ $4,000 base levy, instead of 1% × $1,000,000 ≈ $10,000.
Roughly $6,000 a year less in base property tax.
A military retiree
- $35,000 of military retirement pay, AGI under $125,000.
- $35,000 − $20,000 exclusion = $15,000 taxable.
$20,000 of the pension leaves California taxable income.
Social Security
- $36,000 of Social Security.
California tax on it: $0.
Recent and pending changes
- 2025: up to $20,000 of military retirement pay excluded for tax years 2025–2029, with income limits.
- 2021: Proposition 19 replaced the old once-only, county-limited base-value transfer for 55+.
Run your own numbers — pick California in the calculator’s Taxes tab for a year-by-year estimate. Or compare all 50 states and DC.
Thinking about a move? The free state-to-state retirement tax comparison puts California next to any other state on your own income.
California questions
If the replacement home costs more, do I lose Prop 19?
No — the difference between the replacement's value and the original's is added to your carried-over assessed value.
Does California tax my out-of-state pension after I move away?
Federal law (4 U.S.C. § 114) bars a state from taxing a former resident's pension and retirement-plan income.
Does California tax Roth conversions?
Yes, as ordinary income in the year of conversion.