Understanding California Tax Withholding on a Paycheck

Paychecks can be confusing, no matter where you live. Your employer takes out various taxes, each highlighted by its own special code. But in some states, there are more items listed than others, since each local government has its own unique tax laws. In California, you’ll see the standard federal withholding, plus Social Security and Medicare taxes. But you’ll also see two state-specific withholdings: disability insurance and state withholding.


California residents are subject to standard federal withholdings, as well as state withholding and disability insurance.

Understanding California Withholding

When you start a new job, you’ll complete a Form W-4, where you’ll input your allowances. The information you provide here will be used to determine how much money is taken out of each paycheck. In California, you’ll also need to complete a DE 4 form, which helps you calculate how much needs to be held out for state income tax purposes. Some employers may only have you complete Form W-4. If so, it benefits you to ask to also complete a DE 4 since, as the State of California cautions, completing only the W-4 may lead to your income being under-withheld for the year.

When calculating your California tax allowances, things can get a little confusing, especially if you’re entering allowances on your federal form. The DE 4 form will walk you through how to complete the form if, for instance, you’re married, or you have more than one employer. The form is designed to get you as close to possible to the best withholding for your situation, however, it may help to run the numbers through an online federal and California payroll withholding calculator to ensure the amounts are correct.

Federal and State Withholding Rates

Your federal withholding varies based on your own allowances and will likely make up the largest of all of the amounts taken from your paycheck. In addition to federal withholdings, though, you’ll also have Social Security taken out at 6.2 percent. Your employer will pay an additional 6.2 percent Social Security tax on you, for a total of 12.4 percent. This withholding is a good thing since it is designed to help pay for your retirement. Your federal withholdings will also include 1.45 percent for Medicare, which is also matched by your employer for a total of 2.9 percent.

The California payroll tax rate varies from 1 to 13.3 percent, depending on your income. California has one of the highest tax rates in the nation, so it’s important to pull enough out throughout the year to make sure you’re covered at tax time. You’ll also pay a state disability insurance tax, which will be an additional 1 percent of your taxable wages each year.