The average tax bill in 2017 saw a 3% increase from the previous year. They seem to always be on the rise for various reasons: laws may change, home values increase, or the value of land in your area is reassessed. California State Property Tax Property taxes are a big deal for homeowners. The Golden State has some strict rules for determining residency, so you should consult the Franchise tax board for the guidelines on this and any other tax questions you may have. You can still be considered a resident of California for up to eighteen months after moving away. To make matters even more complicated (and expensive), even if you move out of California, you could still be responsible for paying California taxes on your capital gains. This pushes many taxpayers into a higher tax bracket and, subsequently, a higher tax rate. Capital Gains Tax Rate California Californians pay some of the highest capital gains taxes not only in the nation, but in the entire world! The state taxes all capital gains as income, and does not give any tax breaks for them. A small percentage goes to city or county operations and county transportation funds. California sales taxes are used to supplement almost half of the state’s general fund to pay off Economic Recovery Bonds, support local criminal justice activities, healthcare, and social services programs. Candy and soda, however, are considered groceries and are not taxed. Items like alcohol, cigarettes, and gasoline are subject to various California excise taxes, in addition to the sales tax. If you like to indulge in things that are deemed unhealthy by the state, be prepared to pay more for them. Otherwise, sales tax applies to all sales of tangible goods. In California, only groceries, some prescription drugs, and some alternative energy equipment are exempt from sales tax. Cities and counties can charge an additional sales tax of up to 2.5%, making the maximum sales tax rate 10%, which is among the highest in the country. But don’t get too excited about that yet. California Sales Tax The California state sales tax rate is 7.5%, making it actually one of the lowest in the country. Again, if all of this makes your head spin, a tax professional can make sense of this for you. You pay the tax rate for your income level, plus a marginal percentage of any amount you earned over that. Your tax bracket is the one in which your last earned dollar in any given tax period falls. The higher your income, the more you will pay in taxes. California has ten marginal tax brackets, ranging from 1% to 13.3%. Understanding California tax brackets can be confusing, but it’s important to study them and know where you fall on the range. Knowing all of this will help you not only determine your tax liability, but also enable you to keep as much of your income as possible. You’ll want to take a close look at your paycheck and make sure you have the right amount of deductions, allowances, and withholdings set up. You’ll need to enter your financial details, such as household income, your zip code, and your filing status. Estimate Taxes with a California Tax Calculator Use a California tax calculator to estimate how much you’ll pay in income tax. To figure out how much income tax you’ll be expected to pay, you’ll need to become familiar with California tax brackets and use a tax calculator. This makes California’s top marginal income tax rate a whopping 13.3%! However, only a small percentage of the population pays that, with the majority of taxpayers falling somewhere in the middle of the tax rate range. Another 1% surcharge, the mental health services tax, is collected from taxpayers whose incomes are over $1 million per year.
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