Roth Conversion in California
A Roth conversion in California is taxed as ordinary income at the state’s graduated rates of 1% to 13.3%, the highest top marginal rate of any U.S. state, because California conforms to the federal rule that the converted amount is ordinary income and grants no conversion-specific exclusion or preferential rate.
California taxes the taxable portion of a traditional-to-Roth conversion as ordinary income at 1% to 13.3% (the top rate includes a 1% Mental Health Services Tax on income over $1,000,000). A resident converting $100,000 would generally add that amount to California taxable income; at the top bracket the state tax on it could reach roughly $13,300 (Source: California FTB Publication 1005; Tax Foundation, 2026).
Does California Tax a Roth Conversion? Yes, as Ordinary Income
Yes. California taxes the taxable amount of a traditional-to-Roth IRA or 401(k) conversion as ordinary income at its regular graduated rates of 1% to 13.3% for 2026. There is no conversion-specific exclusion, no preferential rate, and no senior carve-out. The state conforms to the federal treatment that the pre-tax dollars you convert are ordinary income in the conversion year (Source: California FTB Publication 1005, 2025/2026).
What makes California distinct is the ceiling. Nine statutory brackets run 1%, 2%, 4%, 6%, 8%, 9.3%, 10.3%, 11.3%, and 12.3%, and a 1% Mental Health Services Tax (enacted by Proposition 63, the “millionaire’s tax”; the underlying program was renamed the Behavioral Health Services Act by Proposition 1 in 2024) applies to taxable income above $1,000,000. That produces a top marginal rate of 13.3%, the highest of any state (Source: Tax Foundation, “2026 State Income Tax Rates and Brackets”; California FTB, 2026). The $1,000,000 surcharge threshold is not doubled for joint filers, so a large single-year conversion by a married couple can cross it on combined income.
The rate that applies to your conversion depends on where the converted dollars stack on top of your other California income. A conversion pushed into a single high year can climb several brackets; the same dollars spread across years may stay in the 6% to 9.3% range. That sizing question is the core of a multi-year plan, covered in our guide to how much to convert to a Roth.
California 2026 Graduated Bracket Table (Single Filer, Reference)
California indexes its bracket dollar thresholds to inflation each year and publishes final 2026 figures in fall 2026. The rates and structure below are firm for 2026; the dollar thresholds shown are the most recently published 2025 tax-year single-filer figures and will rise slightly for 2026. Married-filing-jointly thresholds are roughly double, except the $1,000,000 surcharge threshold, which is not doubled (Source: California FTB 2025 tax rate schedules; Tax Foundation, 2026).
| Marginal rate | Single taxable income (2025 reference) |
|---|---|
| 1% | $0 to $11,079 |
| 2% | $11,079 to $26,264 |
| 4% | $26,264 to $41,452 |
| 6% | $41,452 to $57,542 |
| 8% | $57,542 to $72,724 |
| 9.3% | $72,724 to $371,479 |
| 10.3% | $371,479 to $445,771 |
| 11.3% | $445,771 to $742,953 |
| 12.3% | $742,953 to $1,000,000 |
| 13.3% (incl. 1% MHST) | Above $1,000,000 |
Roth Conversion California: The Real Stacked Marginal Cost
The headline “13.3% California rate” is only one layer. On the last dollar converted, a California household can stack the state rate on top of the federal bracket (up to 37%), the 3.8% net investment income tax, a Covered California subsidy phase-out, and a Medicare IRMAA surcharge crossing. Combined, the true marginal cost on some conversions can exceed 50% (Source: California FTB; IRS, 2026).
The headline 13.3% rate is often cited in isolation, but for a real household the conversion dollar rarely costs only the state rate. Because a conversion raises modified adjusted gross income (MAGI), it can trigger several stacked effects in the same year:
- Federal ordinary-income tax: the conversion is federal ordinary income at 10% to 37% (Source: IRS, 2026).
- California income tax: add 1% to 13.3% on the same dollars (Source: California FTB, 2026).
- Net investment income tax (NIIT): the conversion itself is not net investment income, but the higher MAGI can pull your other interest, dividends, and capital gains into the 3.8% NIIT (Source: IRS, 2026).
- Covered California subsidy loss: conversion income raises MAGI and can reduce or eliminate premium tax credits for pre-Medicare households.
- Medicare IRMAA: higher MAGI two years earlier can push a retiree into a higher Part B and Part D surcharge tier. See our 2026 Medicare IRMAA brackets.
Layer California’s 12.3% or 13.3% on top of a 32% to 37% federal bracket, add 3.8% NIIT, and factor a subsidy or IRMAA cliff, and the effective marginal cost on the last block of a conversion can exceed 50%. This is why a California conversion is a sizing problem, not a yes-or-no decision. Our Roth conversion break-even framework weighs that upfront cost against future tax-free growth.
California Tax on IRA and 401(k) Withdrawals
California fully taxes traditional IRA, 401(k), 403(b), and similar distributions as ordinary income at 1% to 13.3%. There is no age-based exemption and no general retirement-income exclusion. California is not a Pennsylvania or Illinois-style state that exempts qualified retirement distributions after retirement age (Source: California FTB Publication 1005, 2025/2026).
Every pre-tax dollar you eventually draw from a traditional account is California-taxable at ordinary rates, whether you take it as a normal retirement withdrawal, a required minimum distribution, or a Roth conversion. California does not distinguish among them; it simply taxes the taxable amount as it enters income (Source: California FTB Publication 1005, 2025/2026).
This full-taxation posture is what makes the conversion analysis matter for California residents. Future required minimum distributions (beginning at age 73, or 75 for those born in 1960 or later) will be taxed by California at whatever your rate is then. A planned conversion trades a known California cost today for a smaller California-taxable base later. Paying California now versus California later drives the Roth conversion question here.
Does California Have a Retirement Income Exclusion?
No. California grants no general retirement-income exclusion, deduction, or senior exemption for IRA, 401(k), or pension distributions. One narrow exception exists: for tax years 2025 through 2029, qualified taxpayers may exclude up to $20,000 of federal military retirement pay, subject to AGI caps of $125,000 single or $250,000 joint (Source: California FTB Military filing page; California LAO, 2025/2026).
Unlike states that shelter a fixed dollar amount of retirement income, California taxes ordinary retirement distributions in full. There is no 2026 dollar exclusion for IRA or 401(k) income and no age-based break for those accounts (Source: California FTB Publication 1005, 2025/2026).
The lone carve-out is new and narrow. For taxable years beginning on or after January 1, 2025 and before January 1, 2030, a qualified taxpayer may exclude up to $20,000 of federal military retirement pay and Survivor Benefit Plan payments from California gross income, provided AGI does not exceed $125,000 (single) or $250,000 (surviving spouse or married filing jointly). Above those caps, or for non-military retirement income, no exclusion applies (Source: California FTB; California Legislative Analyst’s Office, 2025/2026).
Does California Tax Social Security?
No. California does not tax Social Security benefits. Any Social Security or Tier 1/Tier 2 railroad retirement benefits included in federal adjusted gross income are subtracted on California Schedule CA, so they are fully exempt from California income tax regardless of your total income (Source: California FTB Schedule CA instructions, 2026).
This is one of the few clear breaks California offers retirees. Even for high-income households, benefits that are taxed federally come back out on the California return (Source: California FTB, 2026). The planning nuance is that a Roth conversion still raises the MAGI that determines how much of your Social Security is taxed federally and whether you cross an IRMAA tier, even though California itself never taxes the benefit. We cover that interaction in our 2026 taxation of Social Security benefits guide.
Does California Tax Qualified Roth IRA Distributions?
No. Once a Roth account is qualified (owner age 59½ and the five-year rule met), California does not tax the distributions, because they represent already-taxed dollars. You pay California tax when you convert, not when you later withdraw qualified Roth money (Source: California FTB Publication 1005, 2025/2026).
California mirrors the federal treatment: qualified Roth distributions are tax-free at the state level. The state tax happens on the front end, at conversion, at 1% to 13.3%. After that, qualified growth and withdrawals escape California income tax entirely. The five-year clock runs separately for each conversion, and California generally follows the federal Form 8606 basis and pro-rata rules that determine how much of any conversion is taxable (Source: California FTB Publication 1005; IRS Form 8606 instructions, 2026).
California’s 2.5% Early Distribution Penalty Before Age 59½
California imposes an additional 2.5% state tax on most early distributions taken before age 59½, on top of the federal 10% penalty (certain SIMPLE plans carry a higher rate). This applies to non-qualified early withdrawals, not to a straight conversion, but it matters if you tap converted funds too soon (Source: California FTB, “Early distributions,” 2025/2026).
The California 2.5% additional tax is separate from ordinary income tax and stacks with the federal 10% early-distribution penalty. A traditional-to-Roth conversion is not itself an early distribution, so the penalty does not apply to the act of converting. The exposure appears when a taxpayer under 59½ withdraws converted principal before the conversion’s own five-year clock is satisfied, which can trigger the penalties on that amount (Source: California FTB Publication 1005; IRS, 2026). This timing is one reason conversion sizing and cash-flow planning belong together.
California Pension Tax Rate
California taxes pension income at its ordinary 1% to 13.3% rates. Public pensions (CalPERS, CalSTRS, federal civil service) and private pensions received by a California resident are fully taxable with no general pension exclusion. Military retirement pay is fully taxed except for the new income-capped $20,000 exclusion available 2025 through 2029 (Source: California FTB Publication 1005, 2025/2026).
California treats pension income the same as any other ordinary income. A resident’s CalPERS or CalSTRS benefit, an out-of-state government pension, and a private employer pension are all taxed at the graduated schedule with no dedicated pension deduction (Source: California FTB Publication 1005, 2025/2026). Because a pension already fills the lower California brackets, conversion dollars stack on top and may land in the 9.3% band or higher.
California Capital Gains Tax in Retirement
California taxes capital gains, including long-term gains, as ordinary income at 1% to 13.3%. There is no preferential state rate for long-term gains. A Roth conversion is not a capital gain, but a large conversion can raise MAGI enough to expose your other realized gains to the 3.8% federal NIIT (Source: California FTB; IRS, 2026).
Where the federal system gives long-term gains a preferential 0%, 15%, or 20% rate, California does not; all gains are ordinary income to the state (Source: California FTB, 2026). In a conversion year this interacts two ways: the conversion income can push other capital gains into a higher California bracket, and the higher MAGI can trigger the federal NIIT on those gains. Coordinating gain realization and conversions is part of a full-year projection.
State Tax on a $100,000 Roth Conversion in California (Illustrative)
Illustrative only: a California resident converting $100,000 adds that amount to California taxable income. Where it lands in the 1% to 13.3% schedule depends on other income. The table below shows the approximate California-only tax on the converted $100,000 at three representative marginal bands (Source: California FTB, 2026). Actual results vary by filing status, deductions, and total income.
The figures below isolate the California state tax on the $100,000 at a given marginal band. They exclude federal tax, NIIT, IRMAA, and subsidy effects, which for many households add far more, as shown in the stacked-cost section above. This is an illustration, not a projection of your result.
| Household situation (illustrative) | Approx. CA marginal band on the conversion | Approx. CA state tax on $100,000 |
|---|---|---|
| Modest other income (retiree, pension plus part-time) | 6% to 8% | ~$6,000 to $8,000 |
| Mid-to-high income (professional household) | 9.3% | ~$9,300 |
| High income, top bracket | 12.3% | ~$12,300 |
| Taxable income over $1,000,000 (incl. 1% MHST) | 13.3% | ~$13,300 |
Because California brackets are graduated, a $100,000 conversion usually spans more than one band; the numbers above assume the full amount sits in the stated band. A precise figure requires modeling the conversion on top of your specific California income.
Rothology® Premier Roth Conversion
A flat-fee, fiduciary Roth conversion planning service: a multi-year conversion plan and tax projections that account for your state. Educational conversation first; no products sold.
Can You Move Out of California Before a Roth Conversion?
Federal law (4 U.S.C. 114) bars a state from taxing a nonresident’s qualified retirement income, including IRA distributions and conversions. So a person who has genuinely established residency outside California before converting is generally not subject to California tax on that conversion. A California resident on the conversion date is taxed by California (Source: California FTB Publication 1005; 4 U.S.C. 114, 2025/2026).
California taxes residents on all income regardless of source, so a conversion by a California resident is California-taxable in the conversion year. Per FTB Publication 1005, for a part-year resident the converted amount is California-source income “only if you were a resident of California on the date of the distribution” (Source: California FTB Publication 1005, 2025/2026).
The protection under 4 U.S.C. 114 means California cannot reach back to source-tax a former resident’s retirement distributions received after establishing nonresidency. The residency question is what governs: California applies rigorous domicile and residency tests (FTB Publications 1031 and 1100), and a move must be genuine and documented, not a paper change around one transaction. Two cautions: California treats a former nonresident as if a resident for prior years for deferred-income basis purposes, and it has recognized no stepped-up IRA basis since 2002 (Source: California FTB Publications 1031 and 1100, 2025/2026). For the broader picture, see our overview of moving to a tax-friendly state in retirement. This is educational information, not a recommendation to move.
Roth Conversion Tax by State 2026: Where California Stands
California’s 1% to 13.3% treatment of conversions is the most expensive of any state. Nine states levy no broad income tax, so a resident there generally owes no state tax on a conversion. Some states exempt qualified retirement distributions after retirement age. The illustrative table below compares approximate state-only tax on a $100,000 conversion (Source: Tax Foundation; state revenue departments, 2026).
State treatment varies widely. The comparison below is illustrative and shows only the state layer on a $100,000 conversion; verify any figure against the relevant state’s department of revenue for 2026. Our companion resource on Roth conversion state taxes covers this in depth.
| State (illustrative) | 2026 treatment of conversion | Approx. state tax on $100,000 |
|---|---|---|
| California | Ordinary income, 1% to 13.3%; top rate highest in U.S. | ~$6,000 to $13,300 |
| No-income-tax states (FL, TX, NV, WA, WY, SD, AK, TN, NH) | No broad state income tax on conversion income | ~$0 |
| Pennsylvania | Generally does not tax qualified retirement-plan distributions after retirement age | ~$0 (if qualified) |
| Illinois | Generally exempts qualified retirement income; flat structure otherwise | ~$0 (if exempt) |
Verify each state’s rule directly, because exemptions turn on age, plan type, and residency. Washington, for example, levies no ordinary income tax but has a separate capital-gains tax and an estate tax; a conversion is ordinary income, not a capital gain, so it is generally untaxed there (Source: Washington Department of Revenue, 2026).
Does California Have an Estate Tax in 2026?
No. California has no state estate tax and no inheritance tax in 2026. Past efforts to create one have not become law. Beneficiaries owe California nothing on inherited assets regardless of amount. Only the federal estate tax applies, with a 2026 basic exclusion of $15,000,000 per person and a 40% top rate (Source: California FTB; IRS, 2026).
This reframes the Roth-versus-traditional legacy question for California families. Because California imposes no death tax, the estate-planning case for a Roth conversion here rests on federal estate tax exposure and on sparing heirs the ordinary income tax on inherited traditional accounts (Source: California FTB; IRS, 2026). A Roth account passes to heirs income-tax-free, and they can generally withdraw it without income tax during the 10-year payout window. For the federal side, see our note on the 2026 estate tax exemption.
How Rothology Plans a Roth Conversion for California Residents
Rothology Premier Roth Conversion is a flat-fee, fiduciary planning service from Q3 Advisors. It builds a multi-year conversion plan and tax projections that account for California’s 1% to 13.3% treatment, MAGI-driven IRMAA and subsidy effects, and residency facts. The firm sells no products and charges a one-time consulting fee. The first conversation is educational.
For a California household, the plan focuses on the questions this state makes expensive: how the size of each year’s conversion affects which California brackets the dollars land in, how the conversion interacts with IRMAA tiers and Covered California subsidies two years out, and how residency status on the conversion date affects the California result. The work is factual and projection-based.
Q3 Advisors is a fiduciary registered investment adviser. Rothology Premier Roth Conversion is delivered for a flat one-time consulting fee, with a multi-year conversion schedule and year-by-year tax projections. No investment products are sold as part of the service. The engagement begins with an educational discussion of your numbers, drawing on the Roth conversion service framework.
Frequently Asked Questions
Does California tax Roth IRA conversions?
Yes. California taxes the taxable amount of a traditional-to-Roth conversion as ordinary income at its 2026 graduated rates of 1% to 13.3%. There is no conversion-specific exclusion or preferential rate, and no senior exemption. The state conforms to the federal rule that converted pre-tax dollars are ordinary income in the conversion year (Source: California FTB Publication 1005, 2025/2026).
Does California tax Social Security retirement benefits?
No. California does not tax Social Security benefits. Benefits included in federal adjusted gross income are subtracted on California Schedule CA, making them fully exempt from California income tax regardless of your total income. Tier 1 and Tier 2 railroad retirement benefits receive the same treatment (Source: California FTB Schedule CA instructions, 2026).
Does California tax 401(k) and IRA withdrawals?
Yes. California fully taxes traditional 401(k), IRA, and 403(b) distributions as ordinary income at 1% to 13.3%. There is no age-based exemption and no general retirement-income exclusion. California is not a state that exempts qualified retirement-plan distributions after retirement age (Source: California FTB Publication 1005, 2025/2026).
Are pensions taxable in California?
Yes. Public pensions (CalPERS, CalSTRS, federal civil service) and private pensions received by a California resident are fully taxable as ordinary income at 1% to 13.3%, with no general pension exclusion. Military retirement pay is fully taxed except for a new $20,000 exclusion for 2025 through 2029, capped at $125,000 AGI single or $250,000 joint (Source: California FTB Publication 1005, 2025/2026).
Can I avoid California tax on a Roth conversion by moving to another state first?
Federal law (4 U.S.C. 114) generally bars a state from taxing a nonresident’s retirement distributions, so a conversion completed after genuinely establishing residency outside California is generally not California-taxable. A California resident on the conversion date is taxed by California. Residency must be genuine and documented under FTB rules; this is educational information, not a recommendation to move (Source: California FTB Publications 1005, 1031, 2025/2026).
Does California charge an early-withdrawal penalty on IRAs before age 59½?
Yes. California imposes an additional 2.5% state tax on most early distributions taken before age 59½, on top of the federal 10% penalty (certain SIMPLE plans carry a higher rate). A conversion is not itself an early distribution, but withdrawing converted funds before the conversion’s five-year clock is met can trigger the penalties (Source: California FTB, “Early distributions,” 2025/2026).
Does California have an estate or inheritance tax in 2026?
No. California has neither a state estate tax nor an inheritance tax in 2026. Past efforts to create one have not become law. Beneficiaries owe California nothing on inherited assets. Only the federal estate tax applies, with a 2026 basic exclusion of $15,000,000 per person and a 40% top rate (Source: California FTB; IRS, 2026).
Sources
- California Franchise Tax Board (FTB), Publication 1005, “Pension and Annuity Guidelines,” ftb.ca.gov (2025/2026).
- California FTB, “Early distributions,” ftb.ca.gov/file/personal/income-types/early-distributions.html (2025/2026).
- California FTB, Schedule CA instructions (Social Security subtraction) (2026).
- California FTB, Publications 1031 and 1100, “Guidelines for Determining Resident Status” and nonresident sourcing (2025/2026).
- California FTB, Military filing page, ftb.ca.gov/file/personal/filing-situations/military.html (2025/2026).
- California Legislative Analyst’s Office, “2025-26 Budget: Partial Income Tax Exclusion for Military Retirement Income,” lao.ca.gov (2025/2026).
- Tax Foundation, “2026 State Income Tax Rates and Brackets,” taxfoundation.org (2026).
- Internal Revenue Service, ordinary-income treatment of conversions, Form 8606, NIIT, and 2026 federal estate exclusion (2026).
- 4 U.S.C. 114 (federal limit on state taxation of nonresidents’ retirement income).