How Much the Top 1% of Californians Pay in Taxes
Written by
Jennifer Taylor
Edited by
Cory Dudak
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
California’s richest residents earn a lot of money. They also pay a large proportion of that to Uncle Sam. Those exorbitant earnings also benefit the state as a whole. In fact, they might be taxed at a higher rate than you would think.
GOBankingRates recently conducted a study to find out exactly how much the top 1% of California earners pay in taxes. Keep reading to uncover the findings.
More Money Equates to Higher Tax Bills
The most populous state in the country, according to the U.S. Census Bureau, California has a population of more than 39 million people. When it comes to taxes, the total number of returns is approximately 17.5 million, with the top 1% composing just 175,045 returns.
However, what the top 1% lacks in volume, they make up for in earnings, with an adjusted gross income of $454.43 million per year. This consumes nearly one-quarter of the state’s total adjusted gross income, which is just over $2 billion annually.
As for income taxes, the top 1% pays approximately $122.5 million per year. In comparison, all California residents combined pay $317.21 million per year — meaning the top 1% pays around 39% of the state’s total income taxes.
The top 1% pays so much income tax mostly due to their sky-high earnings, but they’re also taxed at a higher rate than the average Californian. Specifically, the average tax rate of the top 1% is 26.95%, dropping slightly to an average 24.45% for the top 5% and falling to 15.81% for the state average.
Cost of Living in California
Living in the ‘Golden State’ isn’t cheap. The top 1% likely aren’t having trouble affording housing and cost of living expenses, but it can be more challenging for the average household. For example, the average single family home value is $793,150. This is more than double the average home value of $357,138 in the U.S., according to Zillow.
The median household income in California is $96,334, and the total cost of living averages $86,408 per year. Breaking this numbers down, this includes an average monthly mortgage of $4,687 and average monthly expenditures of $2,514, bringing the total monthly cost of living to $7,201.
Notably less, the median household income in the U.S. as of 2023 — the most recent available data — is $78,538, according to the U.S. Census Bureau. This is approximately $18,000 per year less than the median household income in California, but the higher average cost of living may largely — or completely — negate that.
Methodology: For this study, GOBankingRates analyzed individual tax returns by state to find out how much the top percents pay in taxes. For each state, a number of factors were found, including: total population, population ages 65 and over, total households, and household median income (all sourced from the U.S. Census American Community Survey). The cost of living indexes were sourced from Missouri Economic and Research Information Center. Using the cost of living indexes and the national average expenditure costs (as sourced from the Bureau of Labor Statistics Consumer Expenditure Survey), the average expenditure cost for each location can be calculated. The average single family home value was sourced from Zillow Home Value Index for January 2025. Using the average single family home value, assuming a 10% down payment and using the most recent national average 30-year fixed mortgage rate (as sourced from the Federal Reserve Economic Data), the average mortgage can be calculated. Using the average mortgage and average expenditure costs, the average total monthly and annual cost of living can be calculated. Using data from the IRS SOI tax stats, the individual tax rates by income percentiles and by state were included. The states were sorted to show the highest to lowest tax share percentage. All data was collected on and is up to date as of March 6th, 2025.
More From GoBankingRates
