How does California tax long-term capital gains?

California taxes long-term capital gains as ordinary income rather than taxing them at a special lower rate. Unlike in the federal tax code, where the distinction is made between short-term and long-term capital gains, California applies the same graduated rates of income tax. This is to say that taxpayers in California receiving capital gains from their investments, which have been or have not been held for a year or more, are taxed at state income rates between 1% and more than 13% based on overall taxable income.

For individuals and recipients of investment income, the long-term capital gains are reported on the same California tax return as wages, business income, and other income. State law offers no special deductions or exclusions for long-term gains. The California Franchise Tax Board (FTB) requires full disclosure and proper calculation of gains according to federal rules as the norm, but applies its own rate tables.

As California's plan fails to favor long-term investing returns with preferential rates, the taxpayers typically need strategic planning to manage their overall tax burden. An IBC USA supports clients by providing structured advice on compliance, reporting, and structuring entity options while navigating the complexities of California's income tax treatment.

Knowing how to tax California long-term capital gains is vital within the planning and risk management process. Individuals and businesses with the help of veteran advisors at One IBC USA can be guaranteed complete compliance as well as the optimization of their financial plans according to the provisions of the law of California.