How Are State Income Tax Rates Structured in California?

California uses a progressive income tax system for single and married taxpayers, with nine tax rates ranging from 1 percent to 12.3 percent, as of 2014. The income tax rates are fixed at 8.84 percent for nonbanking corporations and 10.84 percent for financial institutions.

For single and married taxpayers, California imposes a 1 percent tax on the first $7,582 of taxable income earned, as of 2014. Two percent is collected on taxable income between $7,583 and $17,976. The rate jumps to 4 percent for taxable income between $28,372 and $39,384 and 6 percent for taxable income between $28,732 and $39,384.

The rates continue to jump in relation to income, with a maximum rate of 12.3 percent on taxable income of $508,501 and above. The vast majority of single and married taxpayers pay 9.30 percent (imposed on taxable income between $49,775 and $254,250) in state income taxes. Income derived from Social Security benefits, interest from federal bonds, unemployment compensation, state income tax refunds and distributions from health savings accounts are exempt from income tax.

California residents must file their income tax returns on Form 540 2EZ or Form 540 by April 15. Nonresidents or partial-year residents who have earned income in the state must use Short Form 540NR or Long Form 540NR.