Selling a business in California: what the state takes (2026)
California’s top individual income tax rate is 13.3%. Here is what an owner selling company stock pays, with 2026 rules from official sources and worked examples at $10 million, $25 million and $50 million.
- 13.3%
- Top California income tax rate (2026)
- $3,325,000
- State tax on a $25M long-term gain
- 37.1%
- Combined federal and state rate on $25M
- 1 of 51
- Rank by total tax on $25M (1 = highest)
How California taxes a business sale
- Income tax
- Top rate 13.3%: Over $1,000,000 (single), includes 1% Mental Health Services Tax; 12.3% bracket starts at $768,213 for 2026.
- Long-term capital gains
- Capital gains are taxed as ordinary income with no preferential rate or exclusion. The 1% Mental Health Services Tax applies to taxable income over $1M, so a $10M+ gain is taxed at 13.3% at the margin.
- Entity-level taxes
- S corporations pay a 1.5% California franchise tax on net income (minimum $800). The elective 9.3% pass-through entity tax has been extended to taxable years 2026-2030.
- Local taxes
- No local personal income tax on capital gains. Tax Foundation notes some localities levy payroll or wage taxes.
Three worked examples
| Long-term gain | $10,000,000 | $25,000,000 | $50,000,000 |
|---|---|---|---|
| Federal capital gains tax (20%) | $2,000,000 | $5,000,000 | $10,000,000 |
| Net investment income tax (3.8%) | $380,000 | $950,000 | $1,900,000 |
| California tax | $1,330,000 | $3,325,000 | $6,650,000 |
| Total tax | $3,710,000 | $9,275,000 | $18,550,000 |
| Effective combined rate | 37.10% | 37.10% | 37.10% |
| Net proceeds after tax | $6,290,000 | $15,725,000 | $31,450,000 |
| Extra tax versus Texas | $1,330,000 | $3,325,000 | $6,650,000 |
Seller’s tax calculator
Estimate federal and state tax on a stock sale and what is left before fees and debt.
- Long-term capital gain
- $25,000,000
- Federal capital gains tax (20%)
- $5,000,000
- Net investment income tax (3.8%)
- $950,000
- California tax
- $3,325,000
- Taxable gain at 13.3%
- $3,325,000
- Total tax
- $9,275,000
- Effective rate on the gain
- 37.10%
- Net proceeds after tax
- $15,725,000
Illustration, not tax advice. Assumes a resident individual, the whole gain long-term, top marginal rates, no state credits, installment terms, QSBS exclusion or other planning, and no local taxes. Net proceeds are before transaction fees, debt repayment, escrows and earn-outs. Rates are for tax year 2026 where published; see the methodology.
Compare with other states
Neighboring states
Common comparisons
- New York34.1% combined, $16.48M net
- Texas23.8% combined, $19.05M net
- Florida23.8% combined, $19.05M net
- Washington33.5% combined, $16.63M net
- Tennessee23.8% combined, $19.05M net
Methodology and sources
California figures are for tax year 2026. FTB published the 2026 indexed rate schedules in Tax News, October 2026 (CCPI 3.4%); the 12.3% bracket starts at $768,213 for single filers. The 1% Mental Health Services Tax over $1,000,000 is not indexed (RTC 17043). The examples assume a resident individual selling privately held stock for a long-term gain equal to the sale price (zero basis), with every dollar taxed at the top marginal rates, the federal 20% capital gains rate and the 3.8% net investment income tax, and no planning, credits or local taxes. Full assumptions are in the report methodology.
All 50 states and DC with source URLs.
- 1FTB Tax News, October 2026: 2026 Indexing (2026 tax rate schedules)
- 2Cal. Rev. & Tax. Code 17043 (Mental Health Services Tax, 1% over $1,000,000)
- 3FTB S corporations page (1.5% tax, $800 minimum)
- 4FTB Pass-through entity elective tax page (2026-2030)
- 5Tax Foundation, State Individual Income Tax Rates and Brackets, 2026. Secondary source
Data last updated October 26, 2026.
Cite this research
You may quote and republish figures from this page with attribution and a link to the source.
Citation
Laurent Capital Research, “The Seller’s Tax Map: What Selling a Business Costs in Every State (2026): California,” 2026, https://laurent.capital/research/seller-tax-map/californiaLink (HTML)
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