What you pay depends on which tax and who you are

California payroll taxes are not one number — they are several taxes stacked together, and the rate you pay depends on whether you are an employer or employee and which specific tax applies. Employees pay Social Security tax (6.2%), Medicare tax (1.45%), and California state income tax (which ranges from 1% to 13.3% depending on income). Employers pay a matching Social Security tax (6.2%), a matching Medicare tax (1.45%), federal unemployment tax (0.6% in most cases), and California unemployment insurance tax (which varies by employer and industry, typically 1.5% to 5.4%).

The rates that matter most to you depend on your situation. If you are an employee, you see Social Security, Medicare, and state income tax taken from your paycheck. If you are an employer, you pay the employer side of Social Security and Medicare, plus unemployment taxes. Self-employed people in California pay both the employee and employer portions of Social Security and Medicare, plus state income tax.

Key Takeaways

  • California employees pay 6.2% Social Security tax, 1.45% Medicare tax, and state income tax ranging from 1% to 13.3% based on income level.
  • California employers pay 6.2% Social Security tax, 1.45% Medicare tax, 0.6% federal unemployment tax, and state unemployment insurance tax between 1.5% and 5.4%.
  • California state income tax rates are progressive, meaning higher earners pay a higher percentage of their income.
  • Unemployment insurance rates for employers change annually and depend on the employer's industry classification and claims history.
  • Self-employed workers in California pay both employee and employer portions of Social Security and Medicare taxes.

California state income tax rates for employees

California state income tax is progressive, meaning the rate increases as your income increases. The state uses tax brackets, and you pay different rates on different portions of your income. For the 2024 tax year, rates start at 1% on the lowest bracket and reach 13.3% on income over $680,063 for single filers (the top bracket amount changes each year for inflation).

Your employer withholds state income tax from each paycheck based on the information you provide on Form W-4. The amount withheld depends on your filing status, number of dependents, and other income. You do not pay the full 13.3% on all your income — you pay 1% on the first portion, then 2% on the next portion, and so on, only reaching the highest rate on income above the top bracket threshold.

California also has a Mental Health Tax, which is an additional 1% tax on income over $1 million for individuals. This tax began in 2021 and applies only to high earners, so most employees do not pay it.

Social Security and Medicare taxes (FICA)

Social Security tax and Medicare tax are federal taxes, not California-specific, but they appear on every California paycheck. Social Security tax is 6.2% of wages up to a wage base limit (which changes annually — for 2024 it is $168,600). Once you earn above that limit in a calendar year, no more Social Security tax is withheld. Medicare tax is 1.45% of all wages with no limit.

High earners pay an additional 0.9% Medicare tax on wages over $200,000 (single filers) or $250,000 (married filing jointly). This Additional Medicare Tax began in 2013 and applies to California employees the same way it applies everywhere.

Your employer matches both of these taxes — they pay 6.2% Social Security and 1.45% Medicare on your behalf. Self-employed people pay both the employee and employer portions, for a total of 12.4% Social Security and 2.9% Medicare, though they can deduct half of the self-employment tax when calculating adjusted gross income.

Employer unemployment insurance tax in California

California employers pay state unemployment insurance (UI) tax to fund the state's unemployment benefits program. The rate varies by employer and is recalculated annually. Most employers pay between 1.5% and 5.4% of wages, though new employers typically start at 3.4%. The rate depends on the employer's industry classification and the employer's experience rating — a measure of how many former employees have filed for unemployment benefits.

Employers also pay federal unemployment tax (FUTA) at 0.6% of the first $7,000 of each employee's wages per year. This funds the federal unemployment system. Most employers pay this rate, though some states with loans outstanding to the federal government pay a higher rate.

The California Employment Development Department (EDD) sends employers a Notice of information each year showing their UI tax rate for the coming year. Employers can appeal the rate if they believe it is incorrect, but the rate applies to all employees regardless of individual circumstances.

How California payroll taxes appear on your paycheck

If you are an employee, your paycheck stub shows deductions for federal income tax withholding, Social Security tax (labeled as "OASDI" or "Social Security"), Medicare tax, and California state income tax withholding. These are taken from your gross pay before you receive your net pay. Your employer also pays taxes on your behalf that do not appear on your paycheck — the employer portion of Social Security, Medicare, and unemployment taxes.

The total tax burden on your wages is higher than what you see withheld. For example, if you earn $50,000 per year, you might see roughly 7.65% withheld for Social Security and Medicare, plus state income tax withholding (which varies based on your W-4). Your employer also pays 7.65% in matching Social Security and Medicare taxes, plus unemployment taxes. The combined burden is significant, which is why understanding what you pay and what your employer pays matters for budgeting and tax planning.

Self-employed payroll taxes in California

If you are self-employed in California, you pay both the employee and employer portions of Social Security and Medicare taxes through self-employment tax. This totals 15.3% (12.4% Social Security on net earnings up to the annual limit, plus 2.9% Medicare on all net earnings). You also pay California state income tax on your net self-employment income using the same progressive rates as employees.

Self-employed people calculate self-employment tax on Schedule SE (Form 1040) and pay it along with federal income tax. You can deduct half of your self-employment tax when calculating your adjusted gross income, which reduces your taxable income slightly. California does not have a separate self-employment tax — you pay the same state income tax as employees, calculated on your net business income.

If you have employees, you also become responsible for employer payroll taxes on their wages, including California unemployment insurance tax. Many self-employed people use payroll services or accountants to manage these obligations because the rules are complex and penalties for errors can be steep.

Tax rate changes and where to find current rates

Payroll tax rates change annually. Social Security wage base limits, Medicare thresholds, California state income tax brackets, and unemployment insurance rates all adjust each year, usually in January. The Internal Revenue Service (IRS) announces federal rates in October or November for the coming year. California's Employment Development Department announces state rates and brackets in the fall.

To find current rates, visit the IRS website (irs.gov) for federal rates and the California Department of Tax and Fee Administration (cdtfa.ca.gov) or the Employment Development Department (edd.ca.gov) for state rates. Your payroll provider or accountant should also have current rates and can answer questions about how they explore to your specific situation. Rates published in January explore to the entire calendar year, so you can plan accordingly.

Frequently Asked Questions

Why does my California state income tax withholding change from paycheck to paycheck?

Your withholding changes because your employer recalculates it based on your W-4 form and your year-to-date earnings. If you have other income, bonuses, or changes in filing status, the withholding adjusts. You can update your W-4 at any time to increase or decrease withholding, which is useful if you expect a large tax bill or refund at the end of the year.

Do I pay California payroll taxes if I work remotely for an out-of-state company?

Yes. If you live and work in California, you owe California state income tax regardless of where your employer is located. Your employer should withhold California state income tax from your paycheck. If they do not, you are still responsible for the tax and should contact your employer's payroll department to correct it.

What is the difference between my Social Security wage base limit and Medicare tax?

Social Security tax stops once you earn above the annual wage base limit (for 2024, that is $168,600). Medicare tax has no limit — you pay 1.45% on all wages no matter how much you earn. High earners also pay an additional 0.9% Medicare tax on wages above $200,000 (single filers), so Medicare tax can be higher for top earners.

Can I reduce my California payroll taxes?

You cannot avoid Social Security, Medicare, or unemployment taxes — they are mandatory. You can reduce California state income tax withholding by adjusting your W-4, though this means you owe more at tax time. Contributing to a traditional 401(k) or IRA reduces your taxable income and therefore your state income tax. Self-employed people can deduct business expenses to lower their net income subject to tax.

What happens if my employer does not withhold the correct amount of California state income tax?

If your employer under-withholds, you will owe the difference when you file your tax return. If your employer over-withholds, you receive a refund. You can ask your employer to adjust your withholding by submitting a new W-4 form. If your employer refuses to withhold or makes repeated errors, contact the California Department of Tax and Fee Administration or the Franchise Tax Board for guidance.