Calculate California's 1% Mental Health Services Tax surtax on income above $1M, plus regular CA income tax (up to 13.3%) and SDI 1.1% (no cap). Combined effective rate above $1M: ~14.4%.
How California Mental Health Services Tax Works
California Proposition 63 (2004) created the Mental Health Services Tax โ a 1% surcharge on California taxable income above $1,000,000. It applies to all filing statuses at the same threshold. Combined with California's existing 13.3% top income tax rate on income above $1M, the total CA marginal income tax rate above $1M is 14.3%.
Adding the 1.1% SDI (no longer capped as of 2024), the total state marginal rate on wages above $1M reaches approximately 15.4% in 2026.
The Formula
CA Regular Tax = Progressive rates 1%โ13.3% on CA taxable income
MHST = 1% ร MAX(0, CA taxable income โ $1,000,000)
SDI = 1.1% ร wages (no cap in 2026)
Total CA Tax = CA Regular Tax + MHST + SDI
Marginal rate above $1M: 13.3% + 1% + 1.1% = ~15.4%
Example
Single filer, $1,500,000 CA taxable income, all wages:
CA income tax (through brackets up to $1.5M): ~$170,684
MHST: 1% ร ($1,500,000 โ $1,000,000) = $5,000
SDI: 1.1% ร $1,500,000 = $16,500
Total CA tax: ~$192,184
CA effective rate: ~12.8%
Frequently Asked Questions
What is the California Mental Health Services Tax (MHST)?
The California Mental Health Services Tax is a 1% surtax on California taxable income above $1,000,000. It was enacted by Proposition 63 in 2004 and is sometimes called the "millionaire tax." The MHST applies to all filing statuses at the same $1M threshold. Revenue funds county mental health programs. For 2026, combined with the top CA income tax rate of 13.3% and SDI of 1.1%, the marginal rate on income above $1M is approximately 14.4%.
What is California SDI and is there a wage cap in 2026?
California State Disability Insurance (SDI) is 1.1% of wages/salary. Starting January 1, 2024, the SDI wage cap was eliminated โ all wages are subject to the 1.1% SDI tax with no maximum. This was a significant change from prior years when SDI had an annual wage cap. In 2026, SDI applies to all California wages at 1.1% regardless of income level.
What are California's income tax brackets for 2026?
California has 9 progressive income tax brackets for 2026: 1% ($0โ$10,756), 2% ($10,756โ$25,499), 4% ($25,499โ$40,245), 6% ($40,245โ$55,866), 8% ($55,866โ$70,606), 9.3% ($70,606โ$360,659), 10.3% ($360,659โ$432,787), 11.3% ($432,787โ$721,314), 12.3% ($721,314โ$1,000,000), and 13.3% ($1,000,000+). The 13.3% top rate is the highest state income tax rate in the country.
How does California's effective tax rate compare for high earners?
For income above $1 million in California, the marginal tax rate is: 13.3% CA income tax + 1% MHST = 14.3% state income tax, plus 1.1% SDI = 15.4% total state rate. Combined with the top federal rate of 37% plus the 3.8% net investment income tax, a California high earner can face a combined marginal rate of over 54% on ordinary income โ one of the highest effective tax burdens in the world.
Should high earners consider moving out of California for tax purposes?
California's tax burden is significantly higher than no-income-tax states like Nevada, Texas, and Florida. On $2 million of income, the California MHST alone adds $10,000 extra tax per year versus zero in Texas or Florida. Over 10 years, that's $100,000+ in additional MHST alone. However, California has strict rules for establishing domicile change โ simply moving is not enough; you must actually sever ties and establish residency elsewhere to avoid CA taxes on CA-source income.