Does California tax Social Security?
Does California tax Social Security and retirement income?
- The Franchise Tax Board (FTB) excludes Social Security and railroad retirement benefits, Tier 1 and Tier 2, from California income tax.
- Residents pay California tax on pensions, pre-tax IRA or 401(k) withdrawals and capital gains.
- Retirees who leave California owe it no tax on pensions or IRA withdrawals received after the move.
Filers who retire in San Diego still report Social Security on the federal return. The IRS can tax up to 85% of benefits, depending on the filer's other income.
California retirement income tax, by income type
- Pensions and annuities
- FTB taxes them, minus any after-tax contributions the retiree made.
- IRA and 401(k) withdrawals
- FTB taxes pre-tax withdrawals and, unless the filer qualifies for an exception, charges an extra 2.5% on withdrawals before age 59½. FTB doesn't tax qualified Roth withdrawals.
- Capital gains
- FTB taxes them as regular income, with no lower rate for long-term gains.
- Military retirement
- FTB taxes it, minus an exclusion of up to $20,000 a year for 2025 through 2029, within income limits.
- Senior exemption credit
- For 2025, FTB allows a $153 credit for each filer or spouse 65 or older, on top of the $153 personal credit.
A Rancho Bernardo retiree who moves to Arizona pays no California pension tax on CalPERS payments received after the move. Under federal law, states cannot tax a nonresident's retirement income.
Property tax help for San Diego County seniors
Prop 19 base-year transfer
Owners 55 or older can move their assessed value to a replacement primary home in California, up to three times:
- The owner buys or builds the new home within two years before or after selling the old one.
- The County Assessor keeps the old assessed value for a new home of equal or lower market value and adds the difference for a pricier one.
- The owner files with the County Assessor within three years of buying; after that, the County Assessor applies the exclusion only from the filing date.
For a Clairemont couple moving to a pricier Escondido home, the County Assessor sets the new assessed value this way:
| Item | Amount |
|---|---|
| Assessed value of the Clairemont home | $500,000 |
| Clairemont market value at sale | $700,000 |
| Escondido purchase price | $900,000 |
| Difference added | $200,000 |
| Escondido assessed value | $700,000 |
Homeowners' exemption
The County Assessor takes $7,000 off the assessed value of an owner's primary home under the California homeowners exemption, about $70 a year in tax. Owners who file by February 15 get the full amount; owners who file from February 16 to December 10 get 80%, about $56.
Property tax postponement
The State Controller's Office (SCO) lets eligible owners postpone 2026-27 property taxes on their home at 5% simple interest a year, or $50 on each $1,000. SCO places a lien on the home until the owner repays the taxes and interest.
SCO requires the owner to:
- Be 62 or older, blind or disabled
- Own and live in the home as a principal residence
- Have 2025 household income of $57,002 or less
- Have at least 40% equity and no reverse mortgage
SCO takes applications from October 1, 2026 to February 10, 2027 and approves them first come, first served while funds last.
Retirement tax planning before a move
Retirees selling a San Diego home, drawing on an IRA and leaving California can ask a CPA to plan the order of those three steps. Start with how to choose a CPA.