Most states levy an income tax on their residents that is in addition to the federal income tax. Laws vary from state to state but in most states the state income tax is a tax on the annual earnings of individuals, corporations, trusts, limited liability companies, and other legal entities.
There are nine states that do not have a state income tax—including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. But New Hampshire levies a tax on capital gains and Washington state recently enacted a tax on extraordinary profits from the sale of financial assets over $250,000.
In California, residents are subject to state income tax in addition to the federal income tax. The state income tax applies to earnings of individuals, corporations, trusts, limited liability companies (LLCs), and other legal entities. California's tax system is progressive, meaning that the tax rate increases as income rises. The state has several income brackets, with rates ranging from 1% to 13.3% for individuals. For corporations, the standard tax rate is 8.84%, while financial S corporations are taxed at 1.5%. California does not tax Social Security or Railroad Retirement benefits, but it does tax other forms of retirement income. It's important to note that California's tax laws are complex and may include various credits, deductions, and exemptions that can affect the amount of state income tax owed. Taxpayers in California should consult with an attorney or a tax professional to understand their specific tax obligations and planning opportunities.
