8 Tax Credits Californians Should Know About

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Want to reduce your California income tax bill? Check out this list of California state tax credits — for families, child care costs, renters, and more. [[{“value”:”

California’s top state income tax bracket is 12.3%. But lots of Californians won’t pay that top percentage — you need to have almost $700,000 of income before you get taxed at that rate. Instead, many Californians pay a lower tax rate. And California also offers some unique state tax credits for parents, renters, divorced people with joint custody, or other financial situations and stages of life.

Let’s look at a few of the best California tax credits that could reduce your Golden State income taxes.

1. California Earned Income Tax Credit (CalEITC)

This tax credit is for lower-income people with a maximum earned income of $30,950 for 2023. The CalEITC is worth up to $285 for people with no children, or up to $3,529 for families with three children or more. This is a “cash back” tax credit: Even if you don’t owe taxes, you will get the full amount of California Earned Income Tax Credit that you qualify for, based on your income and family size. Check out the CalEITC website for more information.

2. Young Child Tax Credit

Lower-income families that qualify for the CalEITC might also qualify for the Young Child Tax Credit. If your earned income is $30,931 or less, and you have a child under the age of 6, you could get a California state tax credit of up to $1,117. Just like the CalEITC, the Young Child Tax Credit is also a “cash back” tax credit that puts money in your bank account even if you owe zero state income taxes.

3. Child and Dependent Care Expenses Credit

If you’re paying money for child care while you work (or search for a job), you can claim a state income tax credit for those expenses. The California Child and Dependent Care Expenses Credit is based on child care expenses of up to $3,000 for one child, and $6,000 for two or more children.

Keep in mind: $3,000-$6,000 is not the amount of the credit. The exact amount of tax credit will be a percentage of the daycare expenses you paid — and that percentage depends on the results of a complicated tax form calculation.

But no matter how much money you get, every California working parent who pays for child care needs to check out this tax credit. When paying the costs of raising a child, every dollar counts!

4. Nonrefundable renter’s credit

This California tax credit is for people who paid rent for at least half the year and who meet a few other qualifications. Your California income must be:

$50,746 or less for single filers or married/registered domestic partners (RDP) filing separately, or$101,492 or less for married couples/RDPs filing jointly, head of household, and qualifying widowers.

The tax credit doesn’t amount to much: only $60 for single filers and $120 for others. But if you’re paying rent in high-priced areas of California, just like parents with children at home, you probably are happy to get every last tax break you can find.

5. Senior head of household credit

Older adults sometimes need a little extra help in life, especially when they are recently widowed. Californians who are age 65 and older whose spouse or “qualifying person” died in the past two years can qualify for the Senior head of household tax credit. Seniors must have income of less than $92,719 to qualify, and the maximum amount of this tax credit is $1,748.

6. Joint custody head of household

If you are a divorced parent, you know how complex it can be to juggle the scheduling, costs, and occasional friction points of managing joint custody. California offers a special tax credit for parents in joint custody arrangements. To get the joint custody head of household tax credit, you must pay for more than half of the child’s expenses, and your tax-filing status must be single or married/RDP filing separately. The maximum amount of this tax credit is $573.

7. Other state tax credit

Some higher-income Californians who own real estate in other states, or who travel for business and work in other locations, might have situations where they owe taxes in other states. The creatively named “other state tax credit” helps Californians avoid being taxed twice. If you qualify, you can use this tax credit to offset the taxes that you’ve paid to another state. California is not a “low-tax” state, but at least it’s not a “double-tax” state!

8. College Access Tax Credit

California does not offer state income tax deductions for money you put into a 529 college savings plan. But the Golden State does have an interesting program that offers tax credits if you donate money to help other people go to college. This is called the College Access Tax Credit, and if you qualify, you can get a tax credit for 50% of the money you donate to the California Access Tax Credit (CATC) Fund.

The CATC Fund helps pay for college for California students attending Historically Black Colleges and Universities (HBCUs). To get this tax credit, you have to apply online with the California Educational Facilities Authority. If you’re approved, you can make your donation and claim your tax credit.

Bottom line

Some California tax credits are more complicated and less lucrative than others, but all the state tax credits on this list are worth exploring. California taxpayers can use tax software to claim all the credits that they’re allowed to get under the law. See if you can save on your California income taxes in 2024.

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