Finance
Are you prepared? Breaking down California’s tax updates for 2025
From adjusted tax brackets to high-earner surcharges, here’s what Californians need to know to prepare for the 2024-2025 tax season.
As tax season approaches, Californians face one of the most intricate tax systems in the nation. With nine income tax brackets, a unique mental health tax, and updated income thresholds for 2024-2025, understanding these changes is critical for taxpayers to file accurately and maximize refunds.
Here’s a breakdown of the most important updates from the California Tax Board and how they might affect you.
What to know about California’s tax process
Nine tax brackets, new thresholds
While California’s tax rates remain the same – ranging from 1% to 12.3% – the income brackets have shifted slightly:
- Single filers and married filing separately will see changes across all brackets, with the 1% rate applying to income up to $10,756, while the 12.3% rate kicks in for incomes over $721,315.
- Married filers and heads of household have adjusted thresholds, meaning your income placement might have shifted even if your salary hasn’t changed.
These updates aim to account for inflation, but taxpayers should double-check their bracket placement to avoid surprises.
Mental health tax for high earners
California continues to levy a 1% mental health tax on incomes exceeding $1 million. This surcharge remains unchanged and will apply alongside your regular tax rate, making tax planning for high earners more essential than ever.
Standard deduction and tax credits
The 2024 California standard deduction is $5,540 for single filers and $11,080 for married couples filing jointly or heads of household. While this provides some relief, leveraging available state tax credits is key:
- Popular credits include those for childcare expenses, renters, and solar energy installations.
- Certain credits may even offer refunds if their value exceeds your tax bill, so be sure to explore all your options.
Late filing and payment extensions
California offers a six-month automatic extension for filing, moving the deadline to mid-October. However, if you owe taxes, payments are still due by the April 15 deadline, with penalties for late payment. If you can’t pay in full:
- You can request a 30-day payment delay.
- For balances under $25,000, California offers payment plans, typically spread over three to five years.
This flexibility helps taxpayers manage their obligations while avoiding harsh penalties.
Refund tracking and processing times
If you’re expecting a state tax refund, the California Franchise Tax Board provides a handy tracking Where’s My Refund? tool. Refunds typically take:
- 3 weeks after e-filing.
- 3 months after submitting a paper return.
Remember that delays may occur if your return is flagged for accuracy checks, so ensure your information is correct before filing.
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