California payroll tax rates for 2024

California has four main payroll taxes: state income tax withholding, State Disability Insurance (SDI), Paid Family Leave (PFL), and Unemployment Insurance (UI). The rates and caps change each year. For 2024, SDI is 1.0% of wages up to $153,164; PFL is 0.6% of wages up to the same cap; and UI ranges from 0.6% to 6.2% depending on the employer's history and industry, also capped at $153,164 in taxable wages.

State income tax withholding is not a flat rate — it depends on what the employee claims on their W-4 form and their total income. The state income tax brackets range from 1% at the lowest income level to 13.3% at the highest, but most employees pay somewhere between 2% and 9.3% of gross wages.

Employers pay the full UI tax. Employees pay SDI and PFL through payroll deduction. Both employer and employee portions are calculated on gross wages, not net pay, and both are subject to the annual wage cap.

Key Takeaways

  • SDI costs employees 1.0% of wages up to $153,164 per year in 2024; employers do not pay this tax.
  • PFL costs employees 0.6% of wages up to $153,164 per year in 2024; employers do not pay this tax.
  • UI is paid entirely by employers at rates between 0.6% and 6.2%, depending on the employer's size, industry, and claims history.
  • State income tax withholding is deducted from employee paychecks at rates between 1% and 13.3%, determined by the employee's W-4 and income level.
  • The wage cap ($153,164 in 2024) resets each January, so taxes stop being withheld once an employee reaches that amount in a calendar year.

How the wage cap works

SDI, PFL, and UI all have an annual wage cap. Once an employee or employer reaches the cap in a calendar year, no more of those specific taxes are withheld or owed for the rest of that year. The cap is adjusted each January based on average wage growth in California.

For example, if an employee earns $160,000 in 2024, they pay SDI (1.0%) and PFL (0.6%) only on the first $153,164 of wages. Once they hit that amount, their paychecks stop having SDI and PFL deducted, even though they continue earning and paying state income tax.

Employers track the wage cap per employee. If someone changes jobs mid-year, they may hit the cap twice — once with each employer — because the cap is per employer, not per person. The employee pays on both, but the second employer can request a credit from the state if the employee has already paid the full year's amount.

State income tax withholding and brackets

California state income tax is progressive, meaning the rate increases as income increases. The 2024 tax brackets start at 1% for income under $10,099 and reach 13.3% for income over $680,000. Most full-time employees fall into brackets between 4% and 9.3%.

The amount withheld from each paycheck depends on three things: the employee's gross pay, their filing status (single, married, head of household), and what they claimed on their California Form W-4. An employee who claims zero dependents will have more withheld than one who claims several, because the withholding calculation assumes fewer tax deductions.

Unlike SDI, PFL, and UI, state income tax has no wage cap. Employees continue paying state income tax on all wages, no matter how high their annual income is. High earners also pay an additional 1% Mental Health Tax on income over $1 million.

Unemployment Insurance rates by employer

UI is the only payroll tax paid entirely by the employer. The rate depends on the employer's experience rating — a measure of how many former employees have filed for unemployment benefits. New employers typically pay 3.4% in 2024, but the rate can range from 0.6% (for employers with very few claims) to 6.2% (for employers with many claims).

The rate also varies by industry. Agricultural employers, construction firms, and staffing agencies often pay higher rates because those industries have higher unemployment claims. The state publishes rate tables each year showing the range for each industry classification.

UI is capped at the annual wage limit ($153,164 in 2024), so once an employee reaches that amount, the employer stops paying UI tax on their wages for the rest of the year. This means the actual UI cost per employee decreases for higher earners.

When payroll taxes are due

Employers must withhold payroll taxes from employee paychecks and remit them to the state. The deposit schedule depends on the size of the payroll. Most employers deposit taxes quarterly through the state's online system, though large employers may deposit more frequently.

State income tax, SDI, and PFL withholdings are sent to the Franchise Tax Board. UI taxes are sent to the Employment Development Department (EDD). Employers file a quarterly report (Form DE 9) showing total wages, taxable wages, and taxes paid.

Employees do not file separate payroll tax forms during the year. Taxes withheld appear on the W-2 at year-end, and employees report them when filing their state income tax return.

How to find your employer's UI rate

Employers receive a Notice of information from the EDD each October showing their UI rate for the following year. The notice includes the employer's experience rating and the rate percentage. Employers can also look up their rate on the EDD website using their account number.

Employees cannot directly see their employer's UI rate, but they can see the total amount withheld on their pay stub. If an employee suspects their employer is not withholding the correct amount, they can contact the Franchise Tax Board (for income tax and SDI/PFL) or the EDD (for UI) to report it.

Frequently Asked Questions

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

Yes, if you work in California or are a California resident, you owe California payroll taxes regardless of where your employer is located. Your employer must withhold and remit California taxes even if they are based in another state. If your employer fails to do so, you may owe the taxes when you file your state return.

What happens if I reach the wage cap mid-year?

Once you reach the annual wage cap ($153,164 in 2024), your employer stops withholding SDI and PFL for the rest of that calendar year. You continue paying state income tax on all wages. If you change jobs, the new employer's cap is separate, so you may pay SDI and PFL twice in one year if you earn enough at both jobs.

Can I adjust how much state income tax is withheld?

Yes. You can file a new California Form W-4 with your employer at any time to change your withholding. If you expect to owe money at tax time, you can claim fewer dependents to increase withholding. If you expect a refund, you can claim more dependents to decrease withholding.

Is SDI the same as disability benefits?

SDI is a payroll tax that funds the state's disability insurance program. The tax itself is not the same as receiving benefits. If you become unable to work due to illness or injury, you can file a claim for SDI benefits, which are separate from the tax you pay. Not all SDI taxpayers receive benefits.

Why do I pay both SDI and PFL if they come out of the same wage cap?

SDI and PFL are two separate programs with different purposes. SDI covers temporary disability due to illness or injury. PFL covers time off to bond with a new child or care for a family member. Both are funded by employee payroll taxes, and both are capped at the same annual wage limit, but they provide different benefits.