California Tax Guide for Employers (2026) 

California is one of the most complex states for payroll taxes. With a progressive income tax reaching up to 13.3%, mandatory employee-paid State Disability Insurance (SDI), employer-paid SUTA and Employment Training Tax (ETT), and unique supplemental wage rules, there’s a lot for employers to manage. 

California imposes a progressive state income tax on wages earned by both residents and nonresidents working in the state. Tax rates range from 1.0% to 13.3%, making it one of the highest state income tax rates in the country. Withholding is calculated based on the employee’s filing status, allowances, and additional withholding instructions from their DE 4 form. 

California supports the following supplemental calculation methods. When using the flat method, the supplemental rate is Two flat rates (bonus vs. commission). 

Your assigned SUTA rate will be based on your company’s experience with unemployment claims. New employers typically start at the default rate of 3.4%. 

California requires employee contributions to State Disability Insurance (SDI). This is withheld from employee wages. Verify the current rate at https://edd.ca.gov/en/payroll_taxes/.

California requires contributions to CA SDI (includes Paid Family Leave). Both employer and/or employee contributions may apply. Verify the current rates and requirements at https://edd.ca.gov/en/payroll_taxes/.

California employers pay the Employment Training Tax (ETT) on the first $7,000 of each employee’s wages. Verify current rates at edd.ca.gov.

Follow these steps to begin withholding California payroll taxes for your employees: 

1. Obtain your Federal EIN at irs.gov
2. Register with the California EDD at edd.ca.gov/en/Payroll_Taxes/e-Services_for_Business/
3. Submit a Netchex tax team request to enable California SIT, SDI, ETT, and SUTA
4. Have each employee complete their tax forms with an automated onboarding task in Netchex, digitally storing tax forms
5. Configure any additional tax settings in the employee profile

Once setup is complete in Netchex, the system will automatically calculate, withhold, and remit all California payroll taxes on your behalf. 

The following are general filing and deposit deadlines for California payroll taxes. Deadlines may vary based on your employer size and deposit frequency. Always verify current schedules at California Employment Development Department (EDD). 

Note: Deadlines are subject to change. Always confirm current requirements directly with California Employment Development Department (EDD) at https://edd.ca.gov/en/payroll_taxes/. 

The following official resources will help you stay current on California payroll tax requirements: 

• California Employment Development Department (EDD)
• California EDD Employer Guide
• California DE 4 Form

What is California’s SDI rate? 

California SDI is withheld from employees’ wages; the rate is set annually by the EDD. As of 2024, there is no wage cap for SDI. Verify the current rate at edd.ca.gov. 

What is California’s SUTA wage base? 

California’s SUTA wage base is $7,000 per employee per year. Verify at edd.ca.gov. 

What form do California employees complete? 

Employees complete the California DE 4 (Employee’s Withholding Allowance Certificate). 

Does California have local payroll taxes? 

Some California cities have local taxes (e.g., San Francisco’s Payroll Expense Tax), but these are typically employer-side taxes, not employee withholding. 

What is California’s supplemental withholding rate? 

California’s supplemental flat rate is 6.6% for regular supplemental wages under $1 million.