California leaves your Social Security check alone, then generally taxes the rest of what you retire on. So what California retirement income tax costs you depends on where your money comes from. The Franchise Tax Board says its treatment of pensions, annuities, and IRAs is generally the same as the federal one, and California's 2025 rates climb from 1 percent to 12.3 percent. California also allows a military retirement-pay exclusion: a qualifying military retiree can keep up to $20,000 of uniformed-services retirement pay off a California return for tax years 2025 through 2029.

One more piece: a Roth IRA withdrawal that is tax-free federally is untaxed in California too, but that is California following the federal rule, not a break the state wrote.

In This Guide

The One Honest Sentence

People argue about whether California is a high-tax state for retirees, and the honest answer is that it depends entirely on where your money comes from.

If your retirement runs mostly on Social Security, California leaves most of your income alone. The benefit you earned over a working lifetime comes through untouched by the state. But if a pension or an IRA does the heavy lifting, that money is generally taxable in California, on a graduated schedule that ran from 1 percent to 12.3 percent for tax year 2025.

So before you read another word, find your own situation in that split. The rest of this guide is about which side of it you land on.

How California Taxes Social Security and Pensions

Many retirees lean on both of these, and California treats them as opposites.

Social Security is exempt. California does not tax Social Security at all. Under Revenue and Taxation Code Section 17087, Internal Revenue Code Section 86, the federal provision on Social Security and Tier 1 Railroad Retirement benefits, does not apply in California, so the benefits are subtracted from your federal adjusted gross income on Schedule CA and not a dollar of your monthly check is taxed by the state. Tier 1 Railroad Retirement benefits get the same treatment, subtracted right alongside Social Security. California also does not tax Tier 2 railroad retirement benefits reported on federal Form RRB-1099-R, or sick pay under the federal Railroad Unemployment Insurance Act. Two limits apply: railroad benefits paid by individual railroads, reported on federal Form 1099-R, are taxable by California, and the exemption covers United States Social Security and railroad retirement only, so foreign social security is taxable by California as annuity income. Whatever Social Security is included in your federal adjusted gross income comes back out on the California return.

Pensions are generally taxable. Here California flips. The Franchise Tax Board says the California treatment of pensions, annuities, and IRAs is generally the same as the federal treatment of that income, with some differences between California and federal law. So your federal return is the starting point: expect the part of a pension that is taxable there to be taxable in California too, at the state's graduated rates, unless one of those differences applies to you. Military retirement pay has an exclusion of its own, covered below.

The California Franchise Tax Board administers the state income tax and confirms the Social Security exclusion on Schedule CA. The practical takeaway: a retiree living on a fixed pension generally owes California tax on it, while a neighbor living on the same-sized Social Security check owes the state nothing on that check.

IRA and Retirement Plan Withdrawals

A traditional IRA gets much the same treatment as a pension.

On a federal return, distributions from a traditional IRA are taxed as ordinary income, though not all of a distribution is taxable if you made nondeductible contributions. The Franchise Tax Board puts IRAs in the same sentence as pensions and annuities: California's treatment is generally the same as the federal treatment, with some differences between the two laws. So expect the amount that is taxable federally to be what California taxes too, unless one of those differences applies.

That Franchise Tax Board statement names pensions, annuities, and IRAs. The Board does name the 401(k) in its 2025 instructions for form FTB 3805P, where a qualified cash or deferred arrangement described in Internal Revenue Code Section 401(k) is listed among qualified retirement plans, so the early-distribution tax described below reaches one. Revenue and Taxation Code Section 17501(a) also applies the Internal Revenue Code's deferred compensation subchapter in California, except as otherwise provided. None of those sources says how California taxes an ordinary 401(k) withdrawal, so confirm the treatment with the Franchise Tax Board or a tax professional instead of assuming the IRA rule carries over.

The state tax question gets sharper once required minimum distributions start. They generally begin at age 73, though a participant in a workplace plan such as a 401(k) can delay that plan's RMDs until the year they retire unless they own 5 percent of the business sponsoring it, and an RMD is forced taxable income. Because California's rates are graduated, a large taxable distribution can put part of your income in a higher bracket. If you are timing withdrawals, or weighing a Roth conversion, the state tax bite is part of the math. Our guide to retirement accounts for care covers how to draw down these accounts when care costs enter the picture.

Pull the money out early and California adds a charge of its own. A distribution from a qualified retirement plan before age 59 1/2 normally raises your federal tax by 10 percent of the taxable portion. California then layers on its own tax on early distributions from IRAs, qualified retirement plans, annuities, and modified endowment contracts. The Franchise Tax Board defines an early distribution as an amount you withdraw from a qualified retirement plan, annuity, or modified endowment contract before you are age 59 1/2. The tax is 2.5 percent of the amount of the distribution included in income, or 6 percent for an early distribution from a SIMPLE plan during its first two-year period, and it is imposed in addition to the regular California income tax on that same distribution. The Franchise Tax Board lists exceptions to it, so check whether yours is one before you assume the extra tax applies. For someone in their fifties pulling from an IRA to cover a parent's care bill, that is a state tax stacked on top of the federal one, so count both before you withdraw.

One bright spot: a qualified Roth withdrawal is tax-free federally, as long as five years have passed since the first tax year you contributed to a Roth IRA set up for your benefit and the withdrawal is made at 59 1/2 or older, because you are disabled, to your beneficiary or estate after your death, or for a first home. If you cannot meet that test yet, you can still take back your regular contributions tax-free, because the IRS treats them as coming out first, ahead of conversions and earnings. Go past them and part of the withdrawal may be taxable and may also face the 10 percent additional tax. California conforms to federal law on Roth IRAs, and the Franchise Tax Board treats every Roth transaction the same way for California purposes as it is treated federally, so a distribution left out of your federal income is not picked up by the state. An adjustment is needed if you converted a traditional IRA into a Roth and your California basis in the converted account differed from your federal basis. Where no California adjustment applies, a Roth IRA withdrawal that is tax-free federally is tax-free in California too.

Is There a Senior Exclusion

There is a break that starts at 65, and it is a credit against your tax, not an exclusion of retirement income. The 2025 Form 540 booklet says that if you were 65 or older by December 31, 2025 (a 65th birthday on January 1, 2026 counts), you should claim an additional exemption credit on line 9, Senior Exemptions. If you are married or a registered domestic partner, each spouse or partner who is 65 or older should claim one. Do not claim it if someone else can claim you as a dependent.

The 2025 Form 540 2EZ, a separate form, prints its senior exemption amount on line 18: $153 if you or your spouse or partner is 65 or older, or $306 if both are. Exemption credits are limited if the federal adjusted gross income on your Form 540, line 13 is more than $252,203 for single filers and married or registered domestic partner filers who file separately, $504,411 for joint filers and qualifying surviving spouses or partners, or $378,310 for heads of household. Those are 2025-return figures, so check the form for the year you file.

The other breaks turn on the kind of income you receive:

Age also matters in California's early-distribution tax, and the age is 59 1/2. Withdraw from an IRA, a qualified retirement plan, or an annuity before then and California's early-distribution tax can apply. Reaching 59 1/2 is also one of the conditions that can make a Roth IRA withdrawal a qualified distribution on a federal return, alongside the five-year test.

This guide covers how California treats each kind of retirement income, not every credit or deduction on a California return. If you are counting on another break that depends on your age, confirm it with the Franchise Tax Board or a tax professional before you build it into a budget.

The Military Retirement Pay Exclusion

California also allows an exclusion for military retirement pay.

For taxable years beginning on or after January 1, 2025, and before January 1, 2030, a qualified taxpayer may exclude from gross income up to $20,000 of retirement pay from the federal government for service in the uniformed services, or of annuity payments received under a U.S. Defense Department Survivor Benefit Plan. The exclusion is limited to taxpayers whose federal adjusted gross income does not exceed $125,000 for an individual, or $250,000 for a surviving spouse or a spouse filing a joint return.

Two readers should check this before assuming their income is taxed in full. A retired service member should not put military retirement pay in the same bucket as other pensions: if they qualify, up to $20,000 of it can be excluded. And a surviving spouse drawing a Survivor Benefit Plan annuity should check too, because the Franchise Tax Board names those annuity payments alongside retirement pay. A retired service member who also has a VA disability rating can see what the state offers at each rating level in our guide to California disabled veteran benefits by VA rating.

Two limits define the edges. The exclusion is written for those two kinds of income. So do not count on it for a pension from a civilian employer, which falls under the general treatment of pensions described above. And the window is finite: it covers taxable years beginning on or after January 1, 2025 and before January 1, 2030, so a return for a later year cannot rely on it unless the Legislature extends the provision.

What California Retirement Income Tax Costs You

California's income tax is graduated, meaning the rate rises as income rises, and the top of the ladder is steep.

For tax year 2025, the schedule has nine brackets, from 1 percent at the bottom to 12.3 percent at the top. For single filers and married or registered domestic partner filers who file separately, the 12.3 percent rate applies to taxable income over $742,953. It applies over $1,485,906 for joint filers and qualifying surviving spouses or partners, and over $1,010,417 for heads of household. A taxpayer with taxable income over $1 million also owes the Behavioral Health Services Tax, formerly the Mental Health Services Tax: 1 percent of the taxable income over $1 million only, on top of the bracket rate. It takes a very large income to reach that top bracket.

What this means in practice:

The lesson is not that California is uniformly expensive. It is that the more of your income comes from taxable retirement sources rather than Social Security, the more the state takes, and the less you have left for housing, health, and care.

California Retirement Income Tax at a Glance

Income type Taxed by California? Notes
U.S. Social Security and Tier 1 Railroad Retirement No Subtracted from federal income on Schedule CA
Tier 2 railroad retirement (Form RRB-1099-R) and Railroad Unemployment Insurance Act sick pay No Listed by FTB among income California does not tax
Railroad benefits paid by individual railroads (Form 1099-R) Yes Taxable by California
Foreign social security Yes Taxable by California as annuity income
Pensions and annuities Generally yes Follows the federal treatment, with some differences; rates run 1% to 12.3%, plus 1% of taxable income over $1M
IRA distributions Generally yes Follows the federal treatment, with some differences
Roth IRA withdrawals No, when tax-free federally California conforms to federal law; an adjustment applies to a converted IRA whose California basis differed
Early distributions (before age 59 1/2) from IRAs, qualified retirement plans, and annuities Yes, extra An added 2.5% of the amount included in income (6% for a SIMPLE plan in its first two-year period), on top of the regular California tax; FTB lists exceptions
Military retirement pay and DoD SBP annuities Partly Up to $20,000 excluded for tax years 2025-2029, subject to federal AGI caps

Why This Matters for Care

State tax is not an abstraction when you are pricing assisted living or in-home help. It is money that leaves your budget before the care bill arrives.

Every dollar California taxes out of your pension or IRA is a dollar that cannot go toward care. For a retiree weighing whether their income covers monthly care costs, the state tax bite is part of the real number, not the gross one. A monthly pension is not full spending power once the state takes its cut.

That is why the tax picture belongs in any honest funding plan. Our guide to building a senior care funding plan walks through how to map income, taxes, and care costs together, and the broader guide to paying for senior care covers Medicaid, VA benefits, and private-pay options once you know what your after-tax income actually is.

Trying to figure out what your income really covers? Talk with Brevy's care navigator to map your after-tax retirement income against real care costs.

Frequently Asked Questions

Does California tax Social Security benefits?

No. California subtracts Social Security benefits from your federal adjusted gross income, so the state taxes none of your Social Security check. Whatever part of it is included in your federal adjusted gross income, you subtract on Schedule CA.

Does California tax pensions and IRA withdrawals?

Generally, yes. The Franchise Tax Board says the California treatment of pensions, annuities, and IRAs is generally the same as the federal treatment of that income, with some differences between California and federal law. California's graduated rates ran from 1 percent to 12.3 percent for tax year 2025. Military retirement pay has its own exclusion: a qualified taxpayer can exclude up to $20,000 of it for tax years 2025 through 2029. The Board's statement names pensions, annuities, and IRAs. Its early-distribution tax reaches a 401(k), which its form FTB 3805P instructions list among qualified retirement plans. For an ordinary 401(k) withdrawal, confirm the California treatment with the Board or a tax professional.

Is there a senior or age-based break on retirement income in California?

Yes, as a credit against your tax, not an exclusion of retirement income. A filer who was 65 or older by December 31, 2025 should claim an additional exemption credit on the 2025 Form 540, line 9, unless someone else can claim that filer as a dependent. The 2025 Form 540 2EZ, a separate form, prints its senior exemption amount as $153, or $306 when both spouses or partners are 65 or older, and exemption credits are limited above federal adjusted gross income amounts that vary by filing status. The other breaks this guide documents turn on the kind of income you receive. California does not tax Social Security, Tier 1 railroad retirement benefits, or Tier 2 railroad retirement benefits reported on federal Form RRB-1099-R, and a qualified taxpayer can exclude up to $20,000 of military retirement pay or Defense Department Survivor Benefit Plan annuity payments for tax years 2025 through 2029. Age also matters at 59 1/2: a withdrawal from an IRA, qualified retirement plan, or annuity before 59 1/2 can draw California's added 2.5 percent early-distribution tax. This guide does not cover every credit or deduction on a California return, so confirm any other age-dependent break with the Franchise Tax Board or a tax professional.

What are California's income tax rates for retirees?

For tax year 2025, California's graduated rates run from 1 percent to 12.3 percent, and the 12.3 percent rate applies to taxable income over $742,953 for single filers and married or registered domestic partner filers who file separately. A taxpayer with taxable income over $1 million also owes the Behavioral Health Services Tax, 1 percent of the taxable income over $1 million only, on top of the bracket rate. Because the rates are graduated, a large pension or IRA distribution can put part of your income in a higher bracket.

Does California tax military retirement pay?

Partly. For taxable years beginning on or after January 1, 2025 and before January 1, 2030, a qualified taxpayer may exclude up to $20,000 of federal uniformed-services retirement pay, or of annuity payments received under a U.S. Defense Department Survivor Benefit Plan, from California gross income. The exclusion is limited to taxpayers whose federal adjusted gross income does not exceed $125,000 for an individual, or $250,000 for a surviving spouse or a spouse filing a joint return, and retirement pay above $20,000 is outside the exclusion.

Are Roth IRA withdrawals taxed in California?

Not when the withdrawal is tax-free federally, unless a conversion adjustment applies. A qualified Roth IRA withdrawal is tax-free federally: it clears the five-year test, counted from the first tax year you contributed to a Roth IRA, and is made at 59 1/2 or older, because of a disability, to a beneficiary or your estate after your death, or for a first home. A return of your own regular contributions is tax-free federally even before that, since the IRS counts contributions as coming out first, while part of any other non-qualified withdrawal may be taxable. California conforms to federal law on Roth IRAs, and the Franchise Tax Board treats every Roth transaction the same way for California purposes as it is treated federally, so a distribution excluded from your federal income is not picked up by the state. The adjustment arises with a conversion: if you converted a traditional IRA into a Roth and your California basis in that account differed from your federal basis, California requires an adjustment.

Next Steps

Find your income mix first, then plan around it.

  • Separate your Social Security from everything else. The Social Security portion is safe from California tax; the rest generally is not.
  • Estimate the tax on your pension and withdrawals. Apply the graduated rate to your taxable retirement income to see your real after-tax figure.
  • Time large withdrawals carefully. A big IRA distribution can put part of your income in a higher bracket; spreading withdrawals across tax years can lower the bite.
  • Build the after-tax number into your care budget. Use what you keep, not what you gross, when pricing care.

If retirement income alone will not cover care, the next question is what else can. Weigh home equity, long-term care insurance, and benefits programs against your after-tax income before you commit to a care arrangement.

Learn More

FinancialCalifornia Senior Property Tax ReliefHow California seniors lower or postpone property taxes: Prop 13 caps, Prop 19 base-year transfers, Property Tax Postponement, and the $7,000 exemption. FinancialHow Each State Taxes Retirement IncomeNine states tax no retirement income, and four more exempt qualifying retirement plan withdrawals. See how every state taxes Social Security, pensions and IRAs. FinancialHow to Pay for Senior CareHow to pay for senior care: what it costs nationally and how Medicaid, Medicare, VA benefits, and private pay each fit. Who qualifies, what's covered, in 2026. FinancialHow to Pay for Senior Care in CaliforniaHow to pay for senior care in California in 2026: what care costs, plus Medicare, Medi-Cal, IHSS, VA Aid and Attendance, and long-term care insurance. FinancialBuilding a Senior Care Funding PlanA step-by-step plan to pay for senior care: estimate the cost, inventory income and assets, find the payers you qualify for, sequence them, and get help. FinancialRetirement Accounts for CareHow to use a retirement account to pay for senior care: the tax on IRA and 401(k) withdrawals, the early-penalty exceptions, RMDs at 73, and the tax-spike trap.

Find personalized help mapping your California retirement income against care costs at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

Still have questions?

Brevy answers from this guide and every other guide here, and can check what you qualify for.

BC

Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.