California Payroll Tax Guide (2026)
California layers ten income-tax brackets — 1% to 13.3% — on top of four employer-funded payroll levies, giving the state one of the most complex withholding systems in the country. For 2026 the SDI rate is 1.3% with no wage ceiling, UI sits on Schedule F+ at 1.5–6.2% on the first $7,000, and the minimum wage rises to $16.90 per hour.[2]
California payroll at a glance
California runs four state payroll taxes: Personal Income Tax withholding from employee pay, Unemployment Insurance and Employment Training Tax paid by employers, and State Disability Insurance withheld from employees — all administered by the Employment Development Department.[1]
SB 951 — SDI Wage Ceiling Eliminated
Effective January 1, 2024, Senate Bill 951 removed the taxable wage ceiling for State Disability Insurance contributions. All wages are now subject to the SDI withholding rate (1.3% for 2026), regardless of amount. Previously, only wages up to a capped threshold were taxable.[4]
2026 California payroll tax calculator
Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.
Employer pays
Withheld from the employee
State income tax (PIT) withholding is not included above: it depends on the employee’s Form DE 4, Employee’s Withholding Allowance Certificate, filing status and number of allowances, so it cannot be estimated from gross pay alone.
Payroll tax rates & the nexus question
California runs four state payroll taxes. The table below is the whole state layer for 2026.[1]
The state payroll taxes
| Tax | Paid by | 2026 rate | Wage base |
|---|---|---|---|
| UI | Employer | 1.50%–6.20%; 3.40% new | $7,000 |
| ETT | Employer | 0.10% | $7,000 |
| SDI | Employee | 1.30% | No limit |
| PIT withholding | Employee | 1.00%–13.30% | No limit |
Schedule F+ applies for 2026, which is base Schedule F plus a 15% emergency surcharge. The surcharge has been in effect since the pandemic-era trust fund borrowing. Employers receive their individual rate on the annual Notice of Contribution Rates (DE 2088).[3]
Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments may be withheld at a flat 6.6% for state PIT when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.[12]
Who has to register
An employer becomes subject to California payroll taxes when it pays more than $100 in wages in a calendar quarter. Household employers are subject at $750 in cash wages in a quarter. Agricultural employers are subject at $100 in wages in a quarter. Registration is through the EDD’s e-Services for Business portal, and a single state employer account number covers UI, ETT, SDI and PIT withholding.[1]
Multistate and remote employees
When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.
- 1. Localisation of service→
- 2. Base of operations→
- 3. Place of direction & control→
- 4. Employee’s residence
Because that test is applied state by state, an employee who moves across the line changes which agency the wages are reported to and restarts a second wage base for the year. Employers working either side of the California border usually read this page alongside the Nevada state payroll tax guide and the Oregon employer payroll guide, each of which sets out that state’s own registration trigger, deposit schedule and quarterly return.
One remote employee is usually enough. A single person working from home in California generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.
If that employee later relocates, the obligation moves with them, so check the Arizona state payroll tax guide before the first payroll runs in the new state. Businesses hiring across state lines without a finance team on the ground often run this through a dedicated outsourced accounting team instead of opening an office in each one.
Confused by California’s payroll withholding & filing rules?
We handle registration, filings, and year-end forms so your team runs payroll without the guesswork.
Ask a Payroll SpecialistRegistration & return filing
Registration is online and free through e-Services for Business. A single EDD account number covers UI, ETT, SDI and PIT withholding.[1]
How to register
- Pay >$100 in wages→
- e-Services for Business→
- Receive EDD account number→
- Rate notice (DE 2088)→
- File & deposit online
An employer becomes subject to California payroll taxes when it pays more than $100 in wages in a calendar quarter. Household employers trigger at $750 in a quarter. Agricultural employers trigger at $100 in a quarter.[1]
Pay frequency and final pay
California requires at least semimonthly pay periods. Earnings from the 1st through the 15th are due by the 26th of the same month; earnings from the 16th through the end of the month are due by the 10th of the following month. Weekly and biweekly payrolls must be paid within 7 calendar days after the close of the pay period.[9]
When an employee is discharged, the final paycheck is due immediately at the time of termination. An employee who quits with at least 72 hours’ notice is owed final pay on the last day worked. Without 72 hours’ notice, the employer has 72 hours to pay.[9]
Returns, reports & due dates
| Form | What it is | Due |
|---|---|---|
| DE 9 | Quarterly Contribution Return and Report of Wages | April 30, July 31, October 31, January 31 |
| DE 9C | Quarterly Contribution Return and Report of Wages (Continuation) | Filed with DE 9 |
| DE 34 | Report of New Employee(s) | Within 20 days of start date |
| DE 542 | Report of Independent Contractor(s) | Within 20 days of payment |
| Form 941 | Federal quarterly return | Last day of the month after quarter end |
| Form 940 | Federal unemployment, annual | January 31 |
Quarterly returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and penalties attach to both the return and the payment. New hires must be reported on Form DE 34 within 20 calendar days of the start date; failure carries a $24 penalty per unreported employee.[5]
Multistate employers rarely file to a single calendar. Oregon and Nevada each set their own deposit thresholds and due dates — compare them in the Oregon employer payroll guide and the 2026 Nevada payroll tax guide — or hand the whole filing calendar, in every state you are registered in, to CrownGlobe’s outsourced accounting and payroll team.
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Subject wages vs. exempt payments
Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment and SDI wage bases and what is reported at year end.[12]
Subject wages
- Salaries, hourly pay, overtime and piece rates
- Commissions, bonuses and incentive pay
- Most cash tips reported by the employee
- Vacation, holiday and paid sick leave when taken as wages
- Severance and payments in lieu of notice
- The cash value of meals and lodging provided as compensation
- Employer contributions to a non-qualified deferred compensation plan
Not subject
- Reimbursements of genuine business expenses under an accountable plan
- Employer contributions to a qualified retirement plan (401(k), 403(b))
- Employer-paid premiums for accident and health insurance
- Most third-party sick pay after the sixth calendar month
- Payments to a genuine independent contractor
- Workers’ compensation benefits
The UI/ETT wage base is per employer, per year, not per job. If you hire someone in August who already earned $7,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.
Subject wages feed more than the state return. The same figures reconcile to the federal W-2, to Form 941 and to the wage deduction claimed on the company return, which is where payroll data and business tax filing meet. The definitions are not uniform across state lines either: the Washington payroll tax guide shows how a neighbouring state treats the same fringe benefits and supplemental pay.
Glossary of key terms
- PIT (Personal Income Tax)
- California’s graduated state income tax, withheld from employee wages using EDD schedules (Method A or B) based on the employee’s DE 4. Ten brackets range from 1% to 13.3%.
- UI (Unemployment Insurance)
- An employer-only tax on the first $7,000 of each employee’s annual wages. The rate is experience-rated after two to three years; new employers start at 3.4%.
- ETT (Employment Training Tax)
- A 0.1% employer-only tax on the first $7,000 per employee per year, funding the Employment Training Panel for worker training programmes.
- SDI (State Disability Insurance)
- An employee-only withholding at 1.3% of all wages for 2026, with no taxable wage ceiling. SDI funds both Disability Insurance and Paid Family Leave benefits.
- PFL (Paid Family Leave)
- A wage-replacement benefit funded through SDI contributions. It provides partial pay for bonding with a new child, caring for a seriously ill family member, or a qualifying military event.
- DE 4
- Employee’s Withholding Allowance Certificate. The California equivalent of the federal W-4. It determines how much PIT is withheld from each paycheque.
- DE 9 / DE 9C
- The quarterly contribution return (DE 9) and its continuation sheet (DE 9C) filed with EDD. Together they report wages, PIT withheld, and UI/ETT/SDI contributions.
- FUTA
- Federal Unemployment Tax Act. A 6.0% tax on the first $7,000 per employee, reduced to 0.6% by a 5.4% credit where the state has no outstanding federal loan.
- FICA
- Federal Insurance Contributions Act. The combined Social Security (6.2% each side up to $184,500) and Medicare (1.45% each side, no cap) taxes.
- Taxable wage base
- The portion of annual pay that a given tax is calculated on. In California, $7,000 for UI and ETT; no ceiling for SDI and PIT.
- Schedule F+
- The UI rate schedule in effect for 2026. It is base Schedule F plus a 15% emergency surcharge, applied since the state’s UI trust fund incurred federal borrowing during the pandemic.
- Mental Health Services Tax
- A 1% surcharge on taxable income above $1,000,000, enacted by Proposition 63 in 2004. It is built into the top 13.3% marginal PIT rate and is not withheld separately.
California payroll tax, layer by layer
Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.
Layer 1: Federal
| Tax | Rate | 2026 base |
|---|---|---|
| Social Security | 6.2% each side | $184,500 |
| Medicare | 1.45% each side | No limit |
| Additional Medicare | 0.9% employee only | Over $200,000 |
| FUTA, standard | 0.6% net | $7,000 |
| Federal income tax | Per Form W-4 | No limit |
California has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[14]
Layer 2: State
| Tax | Rate | 2026 base |
|---|---|---|
| UI, new employer | 3.40% | $7,000 |
| UI, experienced | 1.50%–6.20% | $7,000 |
| ETT | 0.10% | $7,000 |
| SDI (employee) | 1.30% | No limit |
| PIT, 10 brackets | 1.00%–13.30% | No limit |
| PIT, supplemental | 6.60% | No limit |
California PIT brackets (single filer, 2026): 1% up to $10,412 · 2% to $24,684 · 4% to $38,959 · 6% to $54,081 · 8% to $68,350 · 9.3% to $349,137 · 10.3% to $418,961 · 11.3% to $698,271 · 12.3% to $1,000,000 · 13.3% above $1,000,000. The top rate includes the 1% Mental Health Services Tax.[7]
Layer 3, county & city: local minimum wages
California has no county or city payroll income tax, but dozens of municipalities set minimum wages above the state floor. Los Angeles, San Francisco, San Jose and others each publish annual rates that may exceed $16.90. Employers in those cities must pay the higher local rate.
The state minimum wage is $16.90 an hour, effective January 1, 2026, adjusted annually by CPI with a maximum increase of 3.5% per year. Fast-food workers covered by the FAST Act (AB 1228) have a separate, higher minimum. The tipped minimum is the same as the standard minimum — California does not allow a tip credit.[8]
California also requires daily overtime: 1.5× after 8 hours in a workday or 40 hours in a workweek, and 2× after 12 hours in a workday or after 8 hours on the seventh consecutive day worked in a workweek.[10]
Employers must retain payroll records for at least 4 years.[12]
The footprint that creates a payroll obligation in California usually creates a sales tax one as well, so employers registering here often review multistate sales tax filing at the same time. CrownGlobe serves California businesses directly from its Los Angeles, San Francisco and San Jose offices, or through its virtual CFO services and QuickBooks accounting team.
Overtime exemption is a separate test. A salaried employee is exempt from overtime only if the salary is at least twice the state minimum wage for full-time employment ($66,560 annualized at $16.90/hr) and the duties test is also met. Paying a salary is not by itself enough.[10]
California payroll FAQs
Yes. California imposes a graduated personal income tax with ten brackets from 1% to 13.3%. Employers withhold using the EDD withholding schedules (Method A or B), based on the employee’s DE 4 filing. The top 13.3% rate includes a 1% Mental Health Services Tax on income exceeding $1,000,000.
The State Disability Insurance withholding rate for 2026 is 1.3%, applied to all wages with no taxable wage ceiling. The ceiling was removed effective January 1, 2024 under SB 951, so every dollar of wages is subject to the SDI rate regardless of how much the employee earns.
UI is paid entirely by the employer. New employers pay 3.4% on the first $7,000 of each employee’s wages. After two to three years of experience, the rate is set by experience rating and ranges from 1.5% to 6.2% for 2026 under Schedule F+.
PFL is a wage-replacement benefit funded through SDI contributions. It provides partial pay for employees who take time off to bond with a new child, care for a seriously ill family member, or assist with a qualifying military event. There is no separate employer contribution — PFL is funded by the same 1.3% SDI withholding. The maximum weekly benefit for 2026 is $1,765.
$16.90 per hour effective January 1, 2026, adjusted annually by CPI with a maximum increase of 3.5% per year. Many localities such as Los Angeles, San Francisco and San Jose set higher rates. California does not allow a tip credit, so tipped workers receive the full minimum wage.
California requires overtime at 1.5 times the regular rate after 8 hours in a workday or 40 hours in a workweek. Double time is required after 12 hours in a workday, or after 8 hours on the seventh consecutive day worked in a workweek. These daily overtime rules are more stringent than federal law.
Within 20 calendar days of the employee’s start date using Form DE 34. Reports can be submitted through e-Services for Business, by mail, or by fax. Failure to report carries a penalty of $24 per unreported employee.
If the employer discharges the employee, the final paycheck is due immediately at the time of termination. An employee who quits with at least 72 hours’ notice is owed final pay on the last day worked. Without 72 hours’ notice, the employer has 72 hours to pay. Waiting-time penalties of one day’s wages per day late can accrue for up to 30 days.
Employers file Form DE 9 (Quarterly Contribution Return and Report of Wages) and Form DE 9C (the continuation sheet listing each employee’s wages) with the EDD. These are due by the last day of the month following the quarter end: April 30, July 31, October 31, and January 31.
It is an additional 1% tax on taxable income above $1,000,000, enacted by Proposition 63 in 2004. It is collected through the personal income tax and is built into the top 13.3% marginal rate. Employers do not withhold it separately — it is already incorporated into the EDD withholding schedules for the highest bracket.
Sources & methodology
- EDD – California State Payroll Taxes Overview
- EDD – 2026 Contribution Rates and Withholding
- EDD – Tax-Rated Employers (UI Rates)
- EDD – SDI/PFL Contribution Rates and Benefit Amounts
- EDD – New Hire Reporting
- EDD – Required Filings and Due Dates
- FTB – Tax Calculator, Tables, Rates
- DIR – Minimum Wage
- DIR – Paydays, Pay Periods, Final Wages
- DIR – Overtime FAQ
- IRS – Publication 15 (Circular E)
- EDD – California Employer’s Guide (DE 44)
- EDD – 2026 Payroll Taxes Fact Sheet (DE 201)
- IRS – Federal-State Reference Guide
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