High Earners

How Does the California Millionaire's Tax Work?

Updated November 2026 · 4 min read · Source: California FTB

Quick Answer: California imposes an extra 1% Mental Health Services Tax surcharge on all taxable income exceeding $1,000,000. Combined with the 12.3% top bracket, this gives California the highest top marginal state income tax rate in the nation at 13.3%.

3 Crucial Rules Most People Miss

  1. It applies only to the portion OVER $1,000,000: Earning $1,050,000 does not trigger a 1% tax on your entire income. Only the taxable dollars above $1,000,000 are hit with the extra 1% surcharge.
  2. The $1,000,000 threshold is NOT doubled for Married Couples: Unlike California's regular brackets (which double for Married Filing Jointly), the Mental Health Services surcharge kicks in at $1,000,000 of taxable income regardless of filing status — whether you file Single, Married Filing Jointly, or Head of Household. (For Married Filing Separately, the $1M threshold also applies per return.)
  3. The threshold is NOT indexed for inflation: When Proposition 63 passed in 2004, $1,000,000 was fixed in statute. Because it never adjusts upward, more taxpayers cross the line each year.

Real 2026 Calculation Examples

Here's how the surcharge affects Single filers in 2026 using California's official $5,900 standard deduction and $158 personal credit:

Gross Income Taxable Income 1% Surcharge Total CA Tax Effective Rate
$1,000,000 $994,100 $0.00 $103,721.82 10.37%
$1,200,000 $1,194,100 $1,941.00 $130,057.12 10.84%
$1,500,000 $1,494,100 $4,941.00 $169,957.12 11.33%

Watch Out for the "Marriage Penalty" Above $1M

For Married Filing Jointly couples in 2026, the regular 12.3% top bracket doesn't even start until $1,442,112 of taxable income. Yet the 1% Mental Health surcharge still begins at $1,000,000. That means a married couple with $1,100,000 in taxable income sits in the 11.3% regular bracket, plus the 1% surcharge — an effective marginal rate of 12.3% — before even hitting the 12.3% + 1% (13.3%) tier.

Additionally, because California eliminated the wage cap on CA SDI (1.3% in 2026), high-earning W-2 employees pay 1.3% SDI on every dollar of wages on top of income tax — pushing combined marginal state payroll + income rates to 14.6% on earned W-2 compensation above $1M.

Calculate Your Exact Millionaire's Tax

Our estimator automatically detects taxable income over $1,000,000 and breaks out the 1% Mental Health Surcharge on your receipt.

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