How California Taxes Retirees

From a tax perspective, California, by and large, is not as punitive as one may think, especially for retirees.  The state does NOT tax Social Security income.  They have no estate or inheritance tax.  And believe it or not, income tax rates are not considerable for average taxpayers. Yes, the wealthy, those making over $1mm will get hammered. But for the vast, vast majority of taxpayers CA tax rates are reasonably. Property taxes on a percentage basis of assessed value are actually low. The problem is that the median home value in CA is over 400k.  So, while the percentage of value is low the actual dollar amount is quite high.  Where CA really gets you though is in sales tax.  Sales tax are HUGE in the Golden State. No getting around that.  And if you smoke or drive a car that uses an internal combustion engine you pay through the nose.   One thing you need to consider though is that CA DOES charge its own premature distribution penalty of 2.5% on IRAs, Qualified Retirement Plans and annuities.  I haven't heard ANY state doing this. Just be careful if you're domiciled in CA and are going to use retirement funds to start a business!