California's answer to this question is one sentence long and it is unusually blunt for a tax authority, which is why it is worth quoting rather than explaining. The Franchise Tax Board writes that California does not have a lower rate for capital gains, and that all capital gains are taxed as ordinary income. There is no state equivalent of the federal 0%, 15% and 20% scale, and no state holding period to wait out.
What the Franchise Tax Board actually publishes
On its capital gains and losses page, the Franchise Tax Board sets out that capital gains occur on any asset sold for a price higher than the purchase price, that capital losses occur on any asset sold for less, and that all taxpayers must report gains and losses from the sale or exchange of capital assets. Then comes the sentence that answers this question: California does not have a lower rate for capital gains, and all capital gains are taxed as ordinary income. The page directs the reader to the federal Schedule D and, where the state and federal treatments differ, to California Schedule D (540).
What that means beside the federal charge
A Californian selling an asset faces two separate computations. Federally, the IRS applies a scale where the rate on most net capital gain is no higher than 15% for most individuals, with a 0% band below published taxable income thresholds and 20% above the 15% band, plus a possible 3.8 percent Net Investment Income Tax. At state level there is no scale of its own: the gain joins ordinary income and is taxed at whatever marginal rate that income reaches. The effect is that the federal holding period changes the federal rate and changes nothing about the state charge.
What the page does not say, which is also informative
California's capital gains page draws no long-term or short-term line, because it has no separate rate for one. It does not mention the sale of a main home or any state analogue of the federal exclusion. It publishes no like-kind deferral and no loss limit or carry-forward figure of its own on that page. On this site those are recorded as absences naming the page that was checked rather than left blank, because a blank cell would read as 'not taxed' and that is a claim nobody here is making.
How different states look side by side
California is at one end of the range and the contrast is useful. Washington levies no income tax and instead a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests or other investments and tangible assets, applying to individuals only. Texas's constitution states that the legislature may not impose a tax on the realized or unrealized capital gains of an individual, family, estate or trust. The jurisdiction record on this site holds each of those sentences with its source and the date it was read.
Questions people ask about what is capital gains tax in california
What is the capital gains rate in California?
There is no separate one. The Franchise Tax Board publishes that California does not have a lower rate for capital gains and that all capital gains are taxed as ordinary income, so the rate is your marginal state income tax rate.
Does holding an asset over a year help in California?
It changes the federal rate, not the state one. California's page draws no long-term or short-term distinction at all, because it has no separate rate for either.
Is there a California version of the main-home exclusion?
The Franchise Tax Board's capital gains page does not mention the sale of a main home. On this site that is recorded as an absence naming the page checked, rather than as a statement that no relief exists anywhere in California law.
So do Californians pay twice?
Two separate charges apply to the same gain: the federal one on its own scale, and the state one at the ordinary income rate. Whether a credit or adjustment applies to your own facts is a question for an adviser.