What California takes from your paycheck and why

California payroll taxes are deductions your employer withholds from your wages and sends to the state and federal government. The main ones are California state income tax, Social Security tax, Medicare tax, and unemployment insurance tax. Some people also pay California State Disability Insurance (SDI) and Paid Family Leave (PFL) taxes. The amount withheld depends on your income, filing status, and what you claim on your tax forms.

Your employer is required by law to withhold these taxes and send them to the California Franchise Tax Board, the Internal Revenue Service (IRS), and the California Employment Development Department (EDD). You do not pay these taxes directly — they come out of your paycheck before you receive it. At the end of the year, you receive a Form W-2 that shows how much was withheld, and you file a tax return to settle what you actually owe.

Key Takeaways

  • California withholds state income tax, Social Security, Medicare, and unemployment insurance from most paychecks, with rates that vary based on your income and filing status.
  • SDI and PFL taxes are additional California-specific deductions that fund disability and family leave benefits, with rates set each year by the EDD.
  • Your employer sends withheld taxes to the California Franchise Tax Board and IRS on your behalf, and you reconcile the total on your annual tax return.
  • The amount withheld is based on the W-4 form you file with your employer, which you can update if your tax situation changes.

California state income tax withholding

California state income tax is withheld based on your gross wages, filing status, and the number of dependents you claim on your Form W-4. California has nine tax brackets ranging from 1% to 13.3%, with the highest rate explore to income over a certain threshold that changes each year. Your employer uses a withholding table provided by the California Franchise Tax Board to calculate how much to take from each paycheck.

If you work in California, you owe California state income tax on your wages even if you live in another state. If you live in California but work in another state, the rules depend on which state you work in and whether that state has an income tax. You can adjust your withholding by filing a new Form W-4 with your employer at any time — for example, if you get a second job, get married, or have a major change in income.

Social Security and Medicare taxes

Social Security tax is 6.2% of your wages, and your employer pays an equal 6.2% on your behalf. Medicare tax is 1.45% of your wages, with your employer also paying 1.45%. These are federal taxes, not California taxes, but they are withheld from your California paycheck just like state taxes. Together, they are often called FICA taxes (Federal Insurance Contributions Act).

Social Security tax applies only to wages up to a certain amount each year — that cap changes annually and was $168,600 in 2024. Medicare tax has no wage cap, so you pay it on all your income. If you earn over $200,000 as a single filer (or $250,000 if married filing jointly), you also pay an additional 0.9% Medicare tax on the excess. These taxes fund your future Social Security retirement and disability benefits and your Medicare health insurance when you turn 65.

California State Disability Insurance and Paid Family Leave taxes

State Disability Insurance (SDI) and Paid Family Leave (PFL) are California-specific payroll taxes that fund benefits if you cannot work due to a non-work injury or illness, or if you need to take time off to care for a family member or bond with a new child. Both are withheld from your paycheck as a single combined deduction called the State Disability Insurance (SDI) rate.

The SDI rate is set by the California Employment Development Department each year and varies based on your income level. In 2024, the rate was approximately 1.0% of wages, with a maximum taxable wage base. You do not pay SDI tax on wages above that base amount. If you become disabled or need family leave, you file a claim with the EDD, and if approved, you receive a portion of your regular wages while you are unable to work.

Unemployment insurance tax

Unemployment insurance tax funds benefits for workers who lose their job through no fault of their own. In California, this tax is paid entirely by your employer — you do not see a deduction on your paycheck. Your employer pays a rate that varies based on the company's history of layoffs and the state's unemployment fund balance. The rate ranges from 1.5% to 6.2% of your wages, depending on the employer's experience rating.

If you lose your job, you can file for unemployment benefits with the California Employment Development Department. The amount you receive depends on your earnings history and the reason you left work. You do not need to have paid a specific amount of unemployment tax to be covered — coverage is automatic for most employees.

How to adjust your withholding

Your employer calculates withholding based on the information you provide on your Form W-4 (federal) and Form DE 4 (California). If too much or too little is being withheld, you can file a new form with your employer to change it. Common reasons to adjust withholding include getting a second job, getting married or divorced, having a child, or a significant change in income.

You can use the IRS withholding calculator on irs.gov to estimate whether your current withholding is correct. If you expect to owe money at tax time, you may want to increase your withholding. If you expect a large refund, you may want to decrease it so you receive more money in each paycheck. Changes to your withholding take effect on the next paycheck after your employer processes the new form.

Self-employed and contractor payroll taxes

If you are self-employed or work as an independent contractor, you do not have an employer withholding taxes for you. Instead, you are responsible for paying self-employment tax, which covers both the employee and employer portions of Social Security and Medicare. Self-employment tax is approximately 15.3% of your net business income (12.4% for Social Security and 2.9% for Medicare).

You also owe California state income tax on your self-employment income. You can make quarterly estimated tax payments to the California Franchise Tax Board and the IRS to avoid owing a large amount when you file your annual return. Self-employed people in California may also owe SDI tax depending on their business structure — sole proprietors and partners generally do not, but members of limited liability companies (LLCs) may. Consult a tax professional or the EDD website to determine your specific obligations.

Frequently Asked Questions

Why is my California paycheck different from my coworker's if we make the same salary?

The amount withheld depends on what you claim on your Form W-4 and Form DE 4, not just your salary. If you claim more dependents or have a different filing status, your withholding will be lower. Your coworker may also have a second job, which changes their withholding calculation. Additionally, if either of you recently changed your withholding, the amounts will differ until both forms are fully in effect.

Can I claim exempt from California state income tax withholding?

You can claim exempt from withholding only if you had no tax liability last year and expect to have none this year. If you claim exempt, no California state income tax is withheld from your paycheck. However, if you actually owe tax at the end of the year, you will have to pay it in full when you file your return. Most people should not claim exempt unless they truly expect no tax liability.

What happens if my employer does not withhold the correct amount?

If your employer withholds too little, you will owe the difference when you file your tax return, plus any applicable penalties and interest. If your employer withholds too much, you will receive a refund when you file. If you believe your employer is not withholding correctly, you can file a new Form W-4 or contact the California Franchise Tax Board or IRS for guidance on your specific situation.

Do I pay payroll taxes on bonuses and commissions?

Yes. Bonuses, commissions, and other forms of compensation are subject to the same payroll taxes as regular wages. Your employer withholds Social Security, Medicare, California state income tax, SDI, and any other applicable taxes from these payments. The withholding is calculated the same way as for regular pay, based on your W-4 and DE 4 forms.