Property Management Income Taxes In California

Updated August 7, 2026

12 min read

This guide covers how rental and management income is taxed in California: what the state takes, what the IRS takes, who has to withhold on an out-of-state owner, and when each return is due. Every figure is tied to the statute, agency rule, or published guidance that sets it, so you can confirm a rate before acting on it.

State Income Tax On Rental And Management Income

California taxes individual income on a graduated schedule running from 1 percent to 12.3 percent, with an additional 1 percent surtax on taxable income above $1 million. Rent collected from California real property is California source income no matter where the owner lives, so a management company's owner clients owe California tax on it. A management company organized as an LLC owes the $800 annual tax plus an income based LLC fee, and partnerships and S corporations may elect an entity level pass-through tax at 9.3 percent.

For tax year 2025, the California rate schedule for single filers and married/RDP filing separately runs 1.00 percent on the first $11,079 of taxable income, 2.00 percent over $11,079, 4.00 percent over $26,264, 6.00 percent over $41,452, 8.00 percent over $57,542, 9.30 percent over $72,724, 10.30 percent over $371,479, 11.30 percent over $445,771, and 12.30 percent on taxable income over $742,953. (2025 California Tax Rate Schedules, Schedule X)
For married/RDP filing jointly, Schedule Y for 2025 begins at 1.00 percent on the first $22,158 of taxable income, 2.00 percent over $22,158, and 4.00 percent over $52,528, with the bracket thresholds roughly double the single schedule. (2025 California Tax Rate Schedules, Schedule Y)
In addition to the regular rates, an additional tax of 1 percent applies to the portion of a taxpayer's taxable income in excess of $1,000,000. This is the Mental Health Services Tax added by Proposition 63 and it is imposed on top of the rates in the regular schedules. (Cal. Rev. & Tax. Code Section 17043(a))
Entity level rates are 8.84 percent for corporations other than banks and financials, 10.84 percent for banks and financials, 1.5 percent for S corporations, 3.5 percent for S corporation banks and financials, and 6.65 percent for the alternative minimum tax. (FTB, Business tax rates, last updated 09/24/2025)
Income derived from real property located in California, including rents, lease payments, and the gain on sale, is California source income and is subject to California tax even when the owner is a nonresident. (FTB Publication 1017, Resident and Nonresident Withholding Guidelines (rev. 02/2026), Question 73)
Every LLC doing business in or organized in California must pay an annual tax of $800 using LLC Tax Voucher FTB 3522, due by the 15th day of the 4th month of the taxable year. An additional LLC fee applies once California total income reaches $250,000, starting at $900 for income of $250,000 to $499,999, and is estimated and paid with FTB 3536 by the 15th day of the 6th month of the current tax year. (FTB, Limited liability company, annual tax and LLC fee)
A qualifying entity taxed as a partnership or S corporation may elect to pay an entity level pass-through tax computed at the rate of 9.3 percent of its qualified net income. The election is annual, irrevocable, and must be made on a timely filed original return with FTB 3804. (Cal. Rev. & Tax. Code Section 19900(a)(1); FTB, Pass-through entity elective tax)
FTB states that the pass-through entity elective tax election is available for taxable years beginning on or after January 1, 2021, and before January 1, 2031, and that qualified taxpayers claim a nonrefundable credit for their share of the entity level tax, with unused credits carried over up to 5 years. (FTB, Pass-through entity elective tax, overview and tax credit)

Withholding And Employer Taxes

California is the state where a property manager carries a withholding obligation of its own. FTB names rental property managers as withholding agents and requires 7 percent withholding on rent remitted to a nonresident owner once payments pass $1,500 for the calendar year. Separately, employee payroll taxes go to EDD, which administers unemployment insurance, the employment training tax, state disability insurance, and personal income tax withholding.

FTB lists 'Rental property manager' as an example of a withholding agent. Withholding agents are required to withhold 7 percent on payments or distributions to nonresident payees when the total payments or distributions of California source income exceed $1,500 for the calendar year. (FTB, Withholding on nonresidents, withholding agent information)
Withholding on rent or lease payments to nonresidents is required when the payments are made in the course of the lessee's business and the rented or leased property is located in California. FTB is explicit that 'tenants of residential property are not required to withhold on payments made directly to nonresident owners, but payments from property management companies are subject to withholding.' (FTB Publication 1017 (rev. 02/2026), Question 73)
A California property manager who collects rent for a nonresident owner may deduct the management fee before computing the withholding. FTB's own example: the manager receives $4,000 per quarter from the tenant for a Nevada resident owner and charges $250 per quarter, so $4,000 less $250 equals $3,750 of California income subject to withholding, times 7 percent, equals $262. (FTB Publication 1017 (rev. 02/2026), Question 75)
Withholding is optional at the withholding agent's discretion on the first $1,500 of payments during the calendar year and becomes mandatory as soon as total payments of California source income for the calendar year exceed $1,500. Catch-up withholding is not required if the agent reasonably believed payments would stay under $1,500. (FTB Publication 1017 (rev. 02/2026), Questions 11 and 12)
Four forms drive the process. Form 590 is the Withholding Exemption Certificate a California resident or exempt payee provides. Form 587 is the Nonresident Withholding Allocation Worksheet used to determine how much of a payment is California source. Form 588 is the Nonresident Withholding Waiver Request. Form 592 is the Resident and Nonresident Withholding Statement filed with FTB, and Form 592-B is the statement furnished to the payee. (FTB Publication 1017 (rev. 02/2026), Questions 10, 47, 56, and 60; FTB, Withholding on nonresidents)
Withheld amounts are remitted with Form 592 and Payment Voucher Form 592-V on a period schedule: January 1 through March 31 due April 15, April 1 through May 31 due June 15, June 1 through August 31 due September 15, and September 1 through December 31 due January 15 of the next year. (FTB, Withholding on nonresidents, withholding requirements for a nonresident)
R&TC Section 18668 makes the withholding agent liable to remit the required withholding. FTB warns that if you do not withhold, you may have to pay the amount you were required to withhold, including penalties and interest. Penalties may be withdrawn if the failure was due to reasonable cause. (FTB Publication 1017 (rev. 02/2026), Law References and Questions 139 and 144)
Employee payroll taxes are administered by EDD, not FTB. For 2026 the new employer unemployment insurance rate is 3.4 percent on the first $7,000 of wages per employee, the Employment Training Tax is 0.1 percent on the first $7,000, and State Disability Insurance is 1.3 percent withheld from the employee with no taxable wage limit. Personal income tax withholding uses the DE 44 tables. (EDD, DE 201, 2026 California Payroll Taxes (Rev. 12 (1-26)))
Wages paid to employees are excluded from the nonresident withholding rules, so a manager never double withholds on payroll. FTB directs employers to EDD for employee wage withholding. (FTB Publication 1017 (rev. 02/2026), Question 15, exceptions to withholding)

Federal Obligations

Federal treatment is the same in California as everywhere else. Owners report rental income and expenses on Schedule E, the building is depreciated over 27.5 years, and the management company issues information returns for what it pays out. The information return threshold is the item to note for 2026, because it moved from $600 to $2,000.

Rental income and expenses for residential rental property are reported on Schedule E, and IRS Publication 527 is the controlling guide for how to report them. (IRS Publication 527, Residential Rental Property (Including Rental of Vacation Homes))
Residential rental property is depreciated over 27.5 years under the MACRS General Depreciation System using the straight line method and a mid-month convention. In the first year, depreciation is claimed only for the number of months the property is in service. (IRS Publication 527, MACRS Depreciation)
A business must report payments for services to a non-employee, including payments to an attorney, totaling $600 or more during the calendar year on Form 1099-NEC. The threshold rises to $2,000 for payments made after December 31, 2025. (IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026))
The statutory change comes from the One Big Beautiful Bill Act. For tax years beginning after 2025 the minimum threshold for reporting these payments and for backup withholding on them increased to $2,000, and the threshold will be adjusted for inflation beginning in calendar year 2027. (IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026), What's New)
Form 1099-MISC is the return used for rents, and Form 1099-NEC is the return used for non-employee compensation such as payments to unincorporated vendors and contractors. Both are covered by the same combined instructions and the same $600 to $2,000 threshold change. (IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026))

Filing Deadlines

A California management company runs four separate calendars: FTB nonresident withholding on a quarterly period schedule, EDD payroll returns quarterly, entity level income tax filings in the spring, and county property tax with December and April delinquency dates.

Form 592 with Form 592-V is due April 15 for the January 1 through March 31 period, June 15 for April 1 through May 31, September 15 for June 1 through August 31, and January 15 of the following year for September 1 through December 31. (FTB, Withholding on nonresidents, payment period due dates)
Withholding agents with 250 or more payees must file through Secure Web Internet File Transfer (SWIFT). Agents with fewer than 250 payees may file online through MyFTB or by mail. (FTB, Withholding on nonresidents, filing requirements)
EDD Forms DE 9 and DE 9C for 2026 are due April 1, 2026 for the first quarter and become delinquent April 30, 2026; due July 1 and delinquent July 31 for the second quarter; due October 1 and delinquent November 2 for the third quarter; and due January 1, 2027 and delinquent February 1, 2027 for the fourth quarter. (EDD, DE 201, 2026 California Payroll Taxes, Important Due Dates)
The $800 LLC annual tax is due by the 15th day of the 4th month of the taxable year with FTB 3522. The estimated LLC fee is due by the 15th day of the 6th month of the current tax year with FTB 3536. (FTB, Limited liability company, annual tax and LLC fee due dates)
For an entity electing the pass-through entity tax, Payment 1 is due on or before June 15 during the taxable year of the election in the amount of $1,000 or 50 percent of the prior year PTE elective tax, whichever is greater, and Payment 2 for the remaining amount is due on or before the due date of the original return without regard to extensions. (FTB, Pass-through entity elective tax, payment dates)
Property tax delinquency dates are firm: December 10 for the first secured installment, April 10 for the second, and August 31 for unsecured taxes. February 15 is the legal deadline for filing most exemption claims. (BOE Publication 29 (March 2025), Important Property Tax Dates)
Form 592-B must be furnished to each payee. FTB assesses a penalty for failure to furnish complete, correct, and timely copies of up to $130 per statement for payee statements filed on or after 01/01/2025 and up to $340 for payee statements filed on or after 01/01/2026. (FTB Publication 1017 (rev. 02/2026), Question 138)

Recent Changes Worth Tracking

Effective January 1, 2026: The State Disability Insurance withholding rate for 2026 is 1.3 percent of wages, and there is no SDI taxable wage limit, so the rate applies to all wages. The new employer unemployment insurance rate remains 3.4 percent and the Employment Training Tax remains 0.1 percent, both on the first $7,000 of wages per employee. (EDD, DE 201, 2026 California Payroll Taxes (Rev. 12 (1-26)))
Effective For information returns filed on or after January 1, 2026: FTB information return penalties increased. For information returns and payee statements filed on or after 01/01/2026 the penalty is up to $340 per form, up from up to $130 per form for those filed on or after 01/01/2025. The penalty for intentionally disregarding the filing or correct information reporting requirements rose to the greater of $680 or 10 percent of the required withholding, up from the greater of $330 or 10 percent. (FTB Publication 1017 (rev. 02/2026), Questions 137, 138, and 139)
Effective Payments made after December 31, 2025: Federal change affecting every California management company: the Form 1099-NEC and 1099-MISC reporting threshold rose from $600 to $2,000 for payments made after December 31, 2025, with inflation adjustment beginning in calendar year 2027. (IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026), What's New)

Tax is one half of California compliance. See our guide to California property management laws and regulations for licensing, trust account, and disclosure rules.

This page is one half of the picture. See our guide to the California taxes a management company pays directly for the rest.

Keeping This Straight

Tax rates and thresholds move more often than most operators expect, and the figures circulating in older articles go stale quickly. Check any rate against its citation before you quote it to an owner, and re-check them at the start of each tax year.

This guide is a starting point for professional managers, not tax or legal advice. For a specific filing, work with a CPA familiar with California rental property, and confirm current figures with the California Franchise Tax Board or the IRS.