Article
8 min read
Comprehensive Guide to Payroll Taxes in California
US payroll
Author
Shannon Ongaro
Last Update
July 25, 2025
Table of Contents
California's Progressive Tax System
Payroll Tax Obligations
Paying unemployment insurance
Withholding personal income tax from your California employee
Withholding state disability insurance from your California employee
Paying the employment training tax
Paying your California workers’ compensation
Payroll Tax Due Dates in California
How to Submit Payroll Taxes
Simplify US payroll tax compliance with Deel
Key takeaways
- Unemployment insurance is a key consideration for employers in California to remain compliant with state laws and regulations.
- Other important payroll taxes include personal income tax and employment training tax, both of which the employer is responsible for withholding.
- Deel offers a comprehensive solution for US and international payroll management, simplifying the complex process of payroll compliance for businesses.
Managing payroll in California requires more than just cutting paychecks. With the state’s progressive tax system and multiple employer obligations, from unemployment insurance (UI) to personal income tax (PIT), state disability insurance (SDI), and employment training tax (ETT), it’s essential to stay informed and compliant.
This comprehensive guide to California payroll tax breaks down everything you need to know to navigate state requirements, file accurately, and avoid penalties.
California's Progressive Tax System
California's tax system is designed to increase tax rates with income. This progressive structure affects both employees and employers, especially as businesses expand their workforce.
Related resources: A Guide to PEO in California
Payroll Tax Obligations
Employers in California must navigate multiple taxes, each with specific rates and responsibilities. The California Employment Development Department (EDD) administers these taxes, and it is crucial for employers to report new hires to the California New Employee Registry within 20 days.
| Tax Type | Who Pays | Tax Rate | Taxable Wage Limit | Maximum Tax |
|---|---|---|---|---|
| Unemployment Insurance (UI) Tax | Employer | 1.5% to 6.2% (fixed rate of 3.4% for new employers) | First $7,000 per employee/year | $434 per employee/year |
| Employment Training Tax (ETT) | Employer | 0.1% | First $7,000 per employee/year | $7 per employee/year |
| State Disability Insurance (SDI) tax | Employee | 1.2% (as of 2025) | No limit | No maximum |
| Personal Income Tax (PIT) | Employee | 1 to 12.3% | No limit | No maximum |
Besides managing these taxes, employers must report new hires to the California New Employee Registry within 20 days.
Related resources: Watch the Recap: Hiring in the US - Pathways to Expansion for Growing Teams
Paying unemployment insurance
Unemployment insurance (UI) in California is a state-run program designed to provide temporary financial assistance to eligible individuals who have lost their jobs through no fault of their own. It is aimed at helping unemployed workers meet their basic needs while actively seeking new employment opportunities.
Employers are responsible for paying UI. The amount depends on your number of employees and a rating based on the number of unemployment claims former workers make against your business. The UI rate schedule and the amount of taxable wages are determined annually, and California notifies employers of their new rate every December.
For more information about unemployment insurance in the state, as well as other payroll withholdings mentioned in this guide, the California EDD provides valuable information.
Withholding personal income tax from your California employee
On top of managing federal taxes such as Medicare and Social Security taxes, employers in California are also responsible for withholding and paying state-specific taxes from the employee’s payroll. One of these employer payroll taxes in California is personal income tax (PIT), which is a tax on the income of California residents.
PIT is a type of payroll withholding that is deducted from the employee’s wages and withheld by the employer. California PIT is withheld from employees’ pay based on the Employee’s Withholding Allowance Certificate Form DE-4 on file with their employer.
PIT is determined yearly, and the updated rate can be found on the California EDD’s website.
Related resources: How Do State Payroll Taxes Vary in the US? (2025 Guide)
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Withholding state disability insurance from your California employee
State disability insurance tax (SDI) provides temporary benefit payments to workers for non-work-related illness, injury, or pregnancy. SDI is not to be confused with workers’ compensation, which is a different form of insurance.
SDI also provides paid family leave (PFL) benefits that offer partial wage replacement to people who can’t work because they have family responsibilities. Qualifying responsibilities include caring for a seriously ill family member, bonding with a new child, or participating in an event due to a family member’s military deployment.
SDI is deducted from the employee’s wages before being withheld and paid by the employer. The rates are determined yearly, and the most recent rate is stipulated on the California EDD’s website.
Related resources: State-by-State Guide to Maternity Leave in the United States
Paying the employment training tax
ETT is an employer-paid tax that provides funds to train employees in targeted industries to make California businesses more competitive.
Like other payroll taxes, the employment training tax is determined yearly, and you can view the rate on the California EDD’s website.
Paying your California workers’ compensation
Workers’ compensation is another required payment in California, even if you only have one employee in the state. Other US employers also need to secure this insurance if any of their employees regularly work within the state borders.
Unlike state disability insurance, where the insurance provides payment to workers for non-work-related illness or injury, workers’ compensation is insurance for an employee’s injury while performing their job. The insurance provides temporary financial relief to the injured employee while protecting the employer from extra liability.
Employers can buy insurance through the State Compensation Insurance Fund (State Fund) or a commercial insurance carrier. You also have the option to become a self-insured employer.
For more information, you can consult California’s Department of Insurance website and compare the rates of the top 50 carriers in the state.
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Payroll Tax Due Dates in California
- Quarterly UI and ETT Payments: Due on April 30, July 31, October 31, and January 31 (or the next business day if a weekend/holiday)
- More Frequent Payments for SDI and PIT: The frequency of payments depends on the amount of state income tax withheld and the federal income tax deposit schedule. Late payments are subject to a 15% penalty plus interest
How to Submit Payroll Taxes
The EDD accepts payment via the e-services on the ACI Payments website. Alternatively, you can pay by debit or credit card over the phone.
Note:
- Audit Possibility: The California Employment Development Department (EDD) conducts audits to ensure correct tax payments.
- Nonprofit Organizations: Most nonprofits are responsible for all four payroll taxes. Section 501(c)(3) nonprofits have the option to pay UI taxes like businesses or reimburse EDD for UI benefits paid.
- Local Tax Laws: California has varying sales and use tax rates by jurisdiction, in addition to a 7.25% statewide rate. Examples include San Francisco (8.63%) and Los Angeles (9.5%).
Simplify US payroll tax compliance with Deel
Employers in California can benefit from this introductory guide on certain payroll taxes in the state, but there’s a lot more to understand to remain compliant. To streamline the process and ensure compliance, companies turn to Deel US Payroll.
As a centralized payroll and HR platform, Deel is a comprehensive platform for managing payments, taxes, worker classification, and more. Request a demo and see how we help California employers streamline US payroll processes and ensure compliance with state regulations.
Disclaimer: This article is provided for general informational purposes and should not be treated as legal or tax advice. Consult a professional before proceeding.
FAQs
Who is exempt from California payroll tax?
Generally, most employees are subject to payroll taxes in California. However, some exemptions apply, such as:
- Certain family employees (e.g., a parent employing their child under 18)
- Independent contractors, if properly classified
- Students working for their schools
Does California tax paychecks?
Yes. California deducts state personal income tax (PIT) and state disability insurance (SDI) from employees' paychecks. Employers are responsible for withholding and remitting these taxes.
What is CA withholding tax?
California withholding tax refers to the Personal Income Tax (PIT) employers must withhold from employees’ wages based on their Form DE 4. This helps ensure that employees pay state income tax gradually throughout the year rather than as a lump sum.
Do I have to pay California income tax if I live out of state?
Yes, if you're earning income from a California-based job or performing work in California, even as a non-resident, that income is subject to California income tax. However, remote workers living and working entirely out of state generally are not taxed.
Is California a high tax state?
Yes. California has:
- The highest top marginal state income tax rate in the U.S. at 12.3%, with an additional 1% mental health tax on income over $1 million
- High sales and use taxes, ranging from 7.25% statewide to over 10% in some cities
This progressive tax system contributes to California’s reputation as a high-tax state.
How much does California tax your paycheck?
Taxes deducted from a California paycheck typically include:
- Federal income tax
- Social Security and Medicare (FICA)
- California state income tax (1%–12.3%)
- California SDI (1.2%)
Exact amounts depend on your income, withholdings, and filing status.
How much is $70,000 USD salary after taxes in California?
After federal, state, and FICA deductions, take-home pay is typically $52,000–$56,000 annually, depending on exemptions and filing status.
Use Deel's take-home pay calculator for more information.
How often do you pay payroll taxes in California?
- UI and ETT: Paid quarterly (April 30, July 31, Oct 31, Jan 31)
- SDI and PIT: Payment frequency varies based on how much is withheld; can be monthly, semi-weekly, or next-day deposits depending on payroll size.
About the author
Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.
