California Retirement Taxes (2026): Rates, Probate, Exclusions

How California taxes retirement income (statute-cited)

Probate: California’s de facto estate tax

The 2025 small-estate expansion most guides missed

Is California a good state to retire in for taxes?

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2026 edition · statute-cited · part of Clear Money Guide’s 51-state retirement tax series. This guide covers state taxes on retirement income and estate transfers; property and sales taxes vary by county and are outside its scope.

Updated July 24, 2026. Quick answer: California exempts Social Security and taxes essentially everything else: pensions, 401(k) and IRA distributions are fully taxable as ordinary income at graduated rates topping out at 13.3% — and that top figure is the 12.3% top bracket plus the 1% Behavioral Health Services Tax (formerly the Mental Health Services surtax) on income over $1M, not the “13.8%” or “14.4%” some guides claim (those figures wrongly include SDI, a wage-only levy that never touches retirement income). Two things most guides miss: a brand-new military retirement exclusion, and the statutory probate fee schedule that quietly functions as California’s estate tax.

Federal civil service pensions in California: does California tax federal pensions.

California Form 540, line by line: California Form 540 line 16, California Form 540 line 18 and California Form 540 line 19.

More on public pension systems, topic by topic: UCRP service credit purchase and UCRP disability income.

More on public pension systems, topic by topic: LACERS early service retirement, LACERS disability retirement and LACERS retirement payment options.

More state retirement-income schedules, line by line: California Schedule CA (540) pension lines.

Read box by box from the IRS form text: Form 1099-R boxes 14 to 19.

Inherited an IRA? What the state’s own documents say about taxing those withdrawals: California tax on inherited IRA withdrawals.

Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does California tax 403(b) and 457(b) withdrawals.

Drawing a pension? Whether the state withholds tax from it, from its own documents: California tax withholding on pension payments.

Married, or planning for a spouse’s death? Whether the state is a community property state, from its own statutes: Is California a community property state?.

Before the tax question, the Los Angeles Fire and Police Pensions options, DROP and survivor rules, from the system’s own documents: LAFPP retirement decisions.

Before the tax question, five more California county retirement systems, with refund, survivor and service credit rules from each system’s own documents: Tulare County TCERA retirement decisions, StanCERA retirement decisions, SJCERA retirement decisions, SBCERS retirement decisions and Imperial County retirement decisions.

Selling your home? How the state taxes the profit, from its own tax documents: Does California tax the profit from selling your home?.

Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: California tax withholding on IRA and 401(k) withdrawals.

For a pension earned elsewhere or paid after you move: does California tax out-of-state pensions.

Before the tax question, the Sonoma County Employees’ Retirement Association options, refund and service credit rules, from its own pages: Sonoma County SCERA retirement decisions.

Before the tax question, three more California pension systems, San Francisco, Ventura County and Kern County, with options, refund and buyback rules: San Francisco SFERS retirement decisions, VCERA retirement decisions and KCERA retirement decisions.

Before the tax question, four more California county pension systems, with options, refund and buyback rules: Sacramento SCERS retirement decisions, CCCERA retirement decisions, FCERA retirement decisions and SamCERA retirement decisions.

Before the tax question, the San Bernardino and Alameda county pension options, refund and buyback rules: SBCERA retirement decisions and ACERA retirement decisions.

Before the tax question, the San Diego pension options, refund and buyback rules from the systems’ own pages: SDCERS retirement decisions and SDCERA retirement decisions.

For trust income specifically: does California tax trust income.

Inheriting from, or planning for, someone in this state? Whether the state has an inheritance tax, from its own tax documents: Does California have an inheritance tax?.

For dividends and interest specifically: does California tax dividends and interest.

Contributing to an HSA? How the state taxes it, from its own tax documents: Does California tax HSA contributions?.

Making a gift or planning an estate? The state’s gift tax answer, from its own tax documents: Does California have a gift tax?.

For annuity payments specifically: does California tax annuity income.

Planning for what you leave behind? The state’s estate tax answer, from its own tax documents: Does California have an estate tax?.

Estimate a CalSTRS benefit from age, service credit and final compensation: CalSTRS retirement calculator.

For military retired pay: does California tax military retirement.

Saving for a child’s college? The state’s 529 break has its own page: California 529 plan tax deduction.

For the sale of stocks, funds or real estate: does California tax capital gains.

For 401(k) and IRA withdrawals specifically: does California tax 401(k) and IRA withdrawals.

Put your own numbers through the CalPERS formula: CalPERS retirement calculator.

The state’s income tax schedule: the California 2026 tax brackets (pending).

Before the tax question, the payment options, refund and buyback rules of two California city and county systems: OCERS retirement decisions and LACERS retirement decisions.

Before the tax question, the University of California Retirement Plan options, lump sum cashout and service purchase rules: UCRP retirement decisions.

Before the tax question, the LACERA options and withdrawal rules: LACERA retirement decisions.

California is one of 43 jurisdictions that do not tax Social Security at any income level in 2026. The other 8 exempt benefits only up to an income or age limit. Full rules and statutes: the 51-state table.

How California taxes retirement income (statute-cited)

Income tax	Graduated to 13.3% (= 12.3% top bracket + 1% Behavioral Health Services Tax (renamed from the Mental Health Services surtax for 2025) over $1M). SDI is wage-only — irrelevant to retirement income
Social Security	Not taxed (excluded from CA AGI)
Pension / 401(k) / IRA	Fully taxable as ordinary income — no age-based exclusion or retirement deduction of any kind
Military retirement — NEW	For TY2025–2029: up to $20,000 of military retirement pay, and separately up to $20,000 of Survivor Benefit Plan annuity payments, excludable if federal AGI does not exceed $125,000 for an individual or $250,000 for a surviving spouse or spouses filing a joint return (2025–26 budget, signed June 27, 2025). Until this, California was the only state fully taxing military retirement
Estate / inheritance tax	None — but see probate below

Probate: California’s de facto estate tax

California sets attorney and personal-representative fees by statute on the gross estate (Cal. Prob. Code §§10810, 10800 — identical schedules, each): 4% of the first $100,000; 3% of the next $100,000; 2% of the next $800,000; 1% of the next $9M. Worked example — $1,000,000 gross estate (a paid-off California house): $23,000 attorney + $23,000 personal representative = $46,000 of statutory compensation, plus a $435 filing fee — on an estate that owed California no estate tax at all. Because the schedule runs on gross value, mortgages don’t reduce it. This is why the living-trust math works differently here than anywhere else: our will-vs-trust calculator encodes this exact schedule.

The 2025 small-estate expansion most guides missed

For deaths on/after April 1, 2025: the small-estate affidavit limit is $208,850 (Cal. Prob. Code §§13100–13101, indexed triennially; was $184,500), 40-day wait, personal property — and separately, AB 2016 expanded the simplified §13151 petition to cover a primary residence up to $750,000, letting many home-centered estates skip full probate (and its fee schedule) entirely. Pages still citing $184,500 or ignoring AB 2016 are out of date. Context: probate cost by state · small-estate limits by state.

Is California a good state to retire in for taxes?

Two honest observations cut against the “flee California” reflex: a Social-Security-heavy retiree with modest withdrawals faces lower graduated rates than the headline suggests, and there is no tax at death. The real costs concentrate at the top — large withdrawals taxed to 13.3% — and at probate, where an unplanned $1M estate hands $46,000 to the statutory schedule. For Californians staying put, the highest-leverage moves are a funded living trust (or the new §13151 residence petition) and withdrawal sequencing; for leavers, the comparison below shows what the alternatives actually change.

California vs. common relocation targets

State	Social Security	Pension / 401(k) / IRA	Estate tax	Inheritance tax
California	Not taxed	Fully taxable as ordinary income (to 13.3%)	None	None
Arizona	Not taxed	Taxed at flat 2.5%; $2,500 gov-pension subtraction	None	None
Texas	Not taxed	Not taxed (no income tax)	None	None
Florida	Not taxed	Not taxed (no income tax)	None	None
Washington	Not taxed	Not taxed (no income tax)	Yes: $3M exclusion (deaths on or after July 1, 2026), top rate 20%	None

Comparison rows summarize general rules; see our 51-state retirement tax table for statute-cited detail.

Considering a Roth conversion? The converted amount is taxed as ordinary income in the year you convert, and California may treat it differently from the retirement income above — see how all 51 jurisdictions tax Roth conversions.

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Finding a financial advisor in California

Per the SEC’s July 2026 Investment Adviser roster, California has 1,853 SEC-registered advisory firms (#2 nationally) managing $23.06 trillion (#3 by AUM). Full breakdown: California advisor statistics. Reviewing fee structures: fee-drag calculator.

Thinking about moving?

Four taxes change when you move state in retirement, not one: income tax on withdrawals, state estate tax, state inheritance tax, and what probate costs your heirs. Corridor comparisons involving California:

Leaving California? See leaving California in retirement.

Compare any two states with the retirement tax comparison tool, or browse all corridors at the relocation hub.

What probate costs in California

California is one of only seven jurisdictions that publish an actual statutory percentage schedule, so the probate fee can be computed exactly rather than estimated. Its small-estate affidavit route of $208,850 covers personal property only (real property counts toward the cap but cannot be transferred by affidavit); a primary residence worth up to $750,000 goes through the separate §13151 petition instead. Full detail with the governing statute, the court filing fee and the threshold: California probate cost. To price a specific estate, use the probate cost calculator.

Cite or share this guide

Suggested citation: Clear Money Guide, “California Retirement Taxes (2026 edition),” statute-cited; clearmoneyguide.com/california-retirement-taxes/. Free to cite with attribution and a link. Data verified July 23–24, 2026 against state statutes, session laws, and revenue-department guidance.

Figures verified against the FTB 2025 Form 540 instructions, FTB 2025 tax rate schedules and Form 541 booklet, California Probate Code §§10800, 10810, 13100, 13101 and 13151, the Judicial Council Probate Code §890 adjusted amounts and 2025 fee schedule, and Washington RCW 83.100.040 on September 30, 2026; the budget signing date, the Arizona comparison row, the SDI statement and the no-estate-tax statement were not re-checked.

California Retirement Taxes (2026): The 13.3% Truth, the New Military Exclusion, and Probate’s De Facto Estate Tax

What this state guide covers