What Is the Long Term Capital Gains Tax Rate in California?

California taxes long-term capital gains at the same rate as regular income, unlike the federal government, which offers lower rates for assets held over a year. This distinction can significantly impact investors and homeowners who sell appreciated assets. Understanding how these gains are taxed is essential for financial planning and minimizing tax liability.

Rate Tiers for California Filers

California’s progressive tax system means long-term capital gains are taxed as ordinary income, following the same brackets set by the state’s Franchise Tax Board. In 2024, rates range from 1% to 13.3%, depending on total taxable income.

For lower-income earners, the tax burden is relatively low. Those with taxable income up to $10,412 pay 1%, while income up to $49,223 is taxed at 2%. Higher income levels face increasing rates: 4%, 6%, and 8%.

Once taxable income surpasses $375,221, the rate jumps to 9.3%. Those earning over $625,369 pay 10.3%, while income exceeding $1,250,738 is taxed at 11.3%. The highest rate, 13.3%, applies to taxable income above $1 million, making California’s top rate the highest in the nation.

Filing Status Categories

The amount of long-term capital gains tax owed depends on income and filing status. California recognizes different categories, each with its own income thresholds.

Single

Single filers are subject to the state’s progressive tax brackets. For example, a single filer with $60,000 in taxable income, including capital gains, falls into the 6% bracket for the portion exceeding $49,223 but below $62,938. If their income rises due to a large capital gain, they could enter the 8% bracket for income between $62,938 and $322,499.

Tax strategies like tax-loss harvesting—selling underperforming assets to offset gains—can help manage liability. Another approach is an installment sale, where an asset is sold in stages over multiple years to keep taxable income in lower brackets.

Married Filing Jointly

Joint filers benefit from wider income brackets before reaching higher rates. In 2024, the 6% bracket for married couples extends up to $125,876, compared to $62,938 for single filers. A couple with $120,000 in taxable income, including capital gains, remains in the 6% bracket, while a single filer with the same income would be taxed at 8%.

However, California’s tax brackets do not always scale proportionally for joint filers, sometimes resulting in a “marriage penalty” when both spouses have high earnings. Couples with significant capital gains may consider strategies such as gifting appreciated assets to a lower-earning spouse or contributing to tax-advantaged accounts to reduce taxable income.

Head of Household

Head of household filers—typically single parents or individuals supporting dependents—receive more favorable tax brackets than single filers. In 2024, the 6% bracket extends up to $102,025, compared to $62,938 for single filers.

To qualify, the filer must have a dependent and pay more than half of household expenses. This status can reduce tax liability, particularly for those with moderate incomes who realize capital gains from selling assets like a home or investments. Timing asset sales to stay within lower tax brackets and claiming deductions such as the California Earned Income Tax Credit can further reduce taxable income.

Additional Surcharges for Higher Earnings

High-income earners face additional levies beyond standard tax brackets. The Mental Health Services Tax imposes a 1% surcharge on taxable income exceeding $1 million. This applies to all income sources, including capital gains, pushing the effective tax rate above the 13.3% maximum bracket.

To minimize this surcharge, some investors spread capital gains across multiple years. For example, an investor anticipating a large stock sale might sell in stages over two tax years rather than all at once.

Real estate investors and business owners should also consider how this surcharge interacts with other taxes. Selling rental property may trigger state income tax, the Mental Health Services Tax, federal capital gains taxes, and depreciation recapture. These combined liabilities can significantly increase the total tax burden, making proactive tax planning essential.

Credits and Deductions That Affect LTCG

California offers credits and deductions that can help offset long-term capital gains tax. One of the most significant is the exclusion for the sale of a primary residence. Homeowners who meet ownership and use requirements can exclude up to $250,000 in capital gains if filing singly or $500,000 if married filing jointly. This exclusion is particularly valuable in high-appreciation housing markets like Los Angeles and San Francisco.

Investment-related deductions can also lower taxable capital gains. Taxpayers who incur expenses related to managing their investments, such as advisory fees or financial publication subscriptions, may be able to deduct these costs if they qualify as ordinary and necessary expenses. While federal tax reform suspended many miscellaneous itemized deductions through 2025, California continues to allow certain investment-related deductions that can be applied against taxable income.