Yes, California has local taxes, just not the kind most people worry about first. No city or county in the state charges a personal income tax, so your wages are taxed only at the state and federal level. What local governments do charge is a stack of other levies: property tax with voter-approved add-ons, district sales taxes that vary block by block, real estate transfer taxes, hotel taxes, utility user taxes, parcel taxes, and business taxes. Together they can add thousands of dollars a year to what a California household or business pays.
No Local Income Tax
If you earn wages in California, your income tax goes to one place: the state Franchise Tax Board. No California city or county imposes a separate personal income tax or local payroll tax. That puts the state in a different category from places like New York, Ohio, and Pennsylvania, where local income taxes stack on top of the state rate.1Tax Policy Center. How Do State and Local Individual Income Taxes Work?
So if you moved from one of those states and are bracing for a city tax line on your paycheck, it isn’t there. The tradeoff is everything below.
Property Tax and What Actually Hits Your Bill
Property tax is the largest local tax most Californians pay. Counties collect it and split the proceeds among cities, school districts, and special districts. The system runs under a constitutional cap, but the cap is not the whole bill.
The 1% Base Rate
Proposition 13 added Article XIII A to the California Constitution and set two limits. The base property tax rate cannot exceed 1% of a property’s assessed value. And the assessed value cannot rise by more than 2% per year, no matter what market values do.2California Legislative Information. California Constitution Article XIII A
The assessed value resets to current market value only when the property is sold or new construction is completed. In between, the county assessor applies just the 2% inflation adjustment, which is why a long-time owner may be taxed on a value far below what the home would sell for.3California State Board of Equalization. Publication 800-10 – How Property Is Assessed for Property Tax Purposes
Voter-Approved Overrides
Your actual tax bill almost always exceeds 1% of assessed value. Voter-approved bond measures for schools, libraries, parks, and infrastructure sit on top of the base rate and are not subject to the 1% cap. Effective rates commonly land around 1.1% to 1.25% of assessed value, depending on how many local bonds are active where you live.
Mello-Roos in Newer Developments
Many newer subdivisions carry a Mello-Roos assessment. These are special taxes levied inside Community Facilities Districts to finance public facilities and services in a specific area.4California Legislative Information. California Government Code 53321 They are not based on the property’s value. They’re typically calculated on lot size or structure type, and in some subdivisions they add $3,000 to $8,000 per year on top of the regular tax bill. Before buying, check whether the property sits in a Mello-Roos district. If it does, the total bill will run well above 1% of the purchase price.
Homeowners’ Exemption
An owner-occupied home qualifies for a $7,000 reduction in taxable value. At the 1% base rate, that’s about $70 a year. You have to file for it with your county assessor, and the property must be your principal residence as of January 1, the tax lien date.5California State Board of Equalization. Homeowners Exemption
Sales Tax Varies by Address
The sales tax rate you pay depends on exactly where the sale happens. California sets a statewide floor of 7.25%, which includes both the state rate and a uniform local allocation.6California Department of Tax and Fee Administration. Know Your Sales and Use Tax Rate On top of that, cities and counties add voter-approved district taxes for transportation, public safety, schools, and other local purposes.
District rates run from 0.10% to 2.00%, and more than three-quarters of California businesses operate somewhere at least one district tax applies.7California Department of Tax and Fee Administration. California City and County Sales and Use Tax Rate Information Because district boundaries don’t always follow city lines, neighboring towns can charge noticeably different rates. Lancaster and Palmdale currently hit 11.25%. Dozens of cities in the Bay Area and Los Angeles County sit at 10.75%. A few rural areas with no district taxes stay at the 7.25% floor.8California Department of Tax and Fee Administration. California Sales and Use Tax Rates by County and City
For businesses, the compliance rule is that the rate depends on where the sale originates, not where the buyer lives. The California Department of Tax and Fee Administration collects both state and local sales taxes and audits for mistakes.
Real Estate Transfer Tax When You Buy or Sell
When real property changes hands, the transaction triggers a documentary transfer tax, paid at closing and typically owed by the seller. The base county rate is $1.10 per $1,000 of the sale price. Cities can add their own transfer tax, with a credit so the county and city portions don’t fully stack.9California Legislative Information. California Revenue and Taxation Code 11911
In most of California, the tax on a typical home sale runs a few hundred dollars. In some cities it runs a lot more. Los Angeles voters passed Measure ULA in 2022, adding a 4% tax on sales above $5.3 million and 5.5% on sales at $10.6 million or more.10City of Los Angeles Department of Finance. Real Property Transfer Tax and Measure ULA FAQ San Francisco applies a tiered rate starting at 0.5% and reaching 6% on transactions over $25 million. Oakland charges $10 to $25 per $1,000 depending on sale price. Berkeley reaches $25 per $1,000 on sales above $1.6 million.11CaliforniaCityFinance.com. California City Documentary and Property Transfer Tax Rates In those cities the transfer tax can run into tens of thousands of dollars, and it belongs in your closing budget.
Hotel and Short-Term Rental Tax
Any California city or county can tax stays of 30 days or less in hotels, motels, inns, and similar lodging under Revenue and Taxation Code Section 7280.12California Legislative Information. California Revenue and Taxation Code 7280 This transient occupancy tax is set locally, commonly between 8% and 14%, with major tourist destinations sometimes higher.
Most jurisdictions have extended it to short-term rentals booked through platforms like Airbnb and Vrbo. If you host, you’re generally required to register with your local government, collect the tax from guests, and remit it on a regular schedule. Many cities also require a separate short-term rental registration certificate before you can list. Operating without one can lead to fines and removal from booking platforms.
Utility User Tax on Monthly Bills
Many California cities charge a utility user tax on electricity, gas, water, and sometimes telecommunications. The tax is a percentage of the utility charge, collected by the provider and forwarded to the city. Rates run from 1% to 11%, most often around 5%.13CaliforniaCityFinance.com. Utility User Tax Facts
Not every city imposes one, and the specific utilities covered vary. Some cities tax electricity and gas but not water. Others include phone service. A few apply different rates to residential and commercial accounts. Because the charge is embedded in the utility bill, it’s easy to miss, but at 5% to 7% of a substantial monthly bill it adds up.
Parcel Taxes
A parcel tax is a flat annual charge on each parcel of property, regardless of value. School districts use them most, but cities and special districts also levy them for police, fire, library, and other services. Amounts range from under $100 a year in smaller districts to several hundred dollars in urban areas.
Passing a new parcel tax requires a two-thirds supermajority of voters in the affected district under the California Constitution.14California Legislative Information. California Constitution Article XIII C SEC 2 Many measures include exemptions for seniors or low-income homeowners who apply.
Local Business Taxes
Businesses face something individuals don’t. Many California cities impose a business license tax or gross receipts tax on companies operating within their boundaries. These aren’t income taxes. They apply to the privilege of doing business in the city and are owed whether or not the business turned a profit. A company running at a loss can still owe local tax based on total revenue, employee count, or business type.
San Francisco’s gross receipts tax is a good example of how tiered these can be. Rates vary by industry and revenue. For retail and wholesale in 2025 and 2026, the rate starts at 0.1% on the first $1 million in gross receipts and climbs to just over 1% on receipts above $1 billion.15American Legal Publishing. San Francisco Business and Tax Regulations Code SEC 953.20 – Gross Receipts Tax Applicable to Category 1 Business Activities Other cities use flat annual fees, per-employee charges, or simpler percentage-of-revenue formulas. If you operate in more than one city, you track each one separately.
How Local Taxes Affect Your Federal Return
If you itemize, most of these taxes matter on your federal return. Property tax, state income tax, and local sales tax are deductible under the state and local tax (SALT) deduction. For 2026, the SALT cap is $40,400, or $20,200 for married filing separately.16Office of the Law Revision Counsel. 26 USC 164 – Taxes
California residents hit that cap easily. Between state income tax rates reaching 13.3% at the top bracket and property taxes on even a modest home, many households max out SALT before touching local sales tax. The cap phases down for taxpayers with modified adjusted gross income above $505,000, shrinking by 30 cents on each dollar over that threshold, but it never falls below $10,000.16Office of the Law Revision Counsel. 26 USC 164 – Taxes The $40,400 limit rises 1% a year through 2029, then reverts to $10,000 in 2030 unless Congress acts.
Hotel taxes, utility user taxes, and Mello-Roos assessments generally do not qualify for the SALT deduction, so they’re a straight out-of-pocket cost. Business license and gross receipts taxes are typically deducted as business expenses, not through SALT.