California takes three separate deductions from most paychecks: federal income tax, state income tax, and Social Security and Medicare tax (called FICA)

The amount you see taken out depends on your income level, how often you're paid, the number of dependents you claim, and whether you work in California or just live there. There is no single number that applies to everyone. A person earning $40,000 a year will have a different percentage deducted than someone earning $120,000.

Federal tax is withheld based on the W-4 form you fill out when you start a job. California state tax is withheld based on a similar form (Form W-4, California). FICA taxes are fixed percentages: 6.2% for Social Security and 1.45% for Medicare, taken from every paycheck up to an annual earnings cap for Social Security.

Your employer sends these withheld amounts to the government on your behalf. The goal is to have enough withheld throughout the year so you don't owe a large amount when you file taxes, or so you get a refund.

Key Takeaways

  • Federal income tax, California state income tax, and FICA (Social Security and Medicare) are the three main deductions from California paychecks.
  • The percentage withheld for federal and state income tax depends on your income, filing status, and the allowances or credits you claim on your W-4 forms.
  • FICA taxes are fixed at 6.2% for Social Security and 1.45% for Medicare, with Social Security capped at a maximum annual earnings threshold.
  • You can adjust your withholding by updating your W-4 form if you expect to owe money or want a smaller refund at tax time.
  • Local taxes in some California cities and counties may add an additional small deduction to your paycheck.

How federal income tax withholding works

Federal withholding is calculated using IRS tables that account for your gross pay, pay frequency (weekly, biweekly, monthly), filing status, and the number of dependents or other credits you claim on your W-4. The more dependents or credits you claim, the less federal tax is withheld. The fewer you claim, the more is withheld.

If you claim zero dependents and have no other adjustments, you'll have the maximum federal tax withheld. If you claim dependents or other credits, your withholding goes down. The IRS publishes withholding tables each year, and your employer's payroll system uses those tables to calculate the amount.

Most people in California fall into the 12% or 22% federal tax bracket, but that doesn't mean 12% or 22% of your paycheck goes to federal tax. Your bracket is the rate applied to your income over the year, not the rate applied to each paycheck. The actual withholding per paycheck is lower because of the standard deduction and the way the IRS spreads the tax across all your paychecks.

California state income tax deduction

California has a progressive state income tax system, meaning the rate increases as your income increases. State tax rates range from 1% on the lowest incomes to 13.3% on the highest. However, like federal tax, the rate that applies to your income bracket is not the same as the percentage taken from each paycheck.

Your employer withholds California state tax based on the Form W-4 you complete and the state's withholding tables. If you claim dependents or other adjustments, your state withholding decreases. If you claim zero adjustments, more is withheld.

California residents who work out of state still owe California income tax on that income. If you live in California but work in Nevada or another state with no income tax, California will still withhold tax from your paycheck based on your California residency.

Social Security and Medicare (FICA) taxes

FICA taxes are the same for everyone and do not change based on your income level or filing status. Social Security tax is 6.2% of your gross pay, up to a maximum annual earnings threshold (the threshold changes each year). Medicare tax is 1.45% of your gross pay with no earnings cap. Together, FICA is usually 7.65% of your paycheck.

If you earn over the Social Security earnings cap in a year, no more Social Security tax is withheld once you reach that cap, but Medicare tax continues. Your employer also pays a matching 6.2% for Social Security and 1.45% for Medicare on your behalf, but that amount does not come out of your paycheck.

Self-employed people pay both the employee and employer portions of FICA (15.3% total), but employees only see the employee portion (7.65%) on their paychecks.

Local taxes in California

Some California cities and counties impose local income taxes on residents or workers. San Francisco, Los Angeles, and several other municipalities have local taxes that are withheld from paychecks. The amount varies by location and income level.

If you work in a city or county with a local tax, your paycheck will show an additional line item for that tax. If you live in one jurisdiction but work in another, you may owe tax to both, though some agreements between cities prevent double taxation. Check your paycheck stub to see if a local tax is being withheld.

How to read your paycheck stub

Your paycheck stub shows your gross pay (total earnings before deductions), each deduction line by line, and your net pay (what you actually receive). Federal withholding is usually labeled "FIT" or "Federal Income Tax". California state withholding is labeled "SIT" or "CA Income Tax". Social Security is labeled "OASDI" or "SS", and Medicare is labeled "Med" or "Medicare".

If the numbers don't match what you expect, check that your W-4 information is correct. If you recently changed jobs, got married, had a child, or had a major change in income, your withholding may be off. You can update your W-4 at any time to adjust future paychecks.

Adjusting your withholding

If you received a large refund last year, you had too much withheld. If you owed money at tax time, you didn't have enough withheld. In either case, you can adjust your withholding by completing a new W-4 form and giving it to your employer's payroll department.

The IRS provides a withholding calculator on its website that walks you through the questions on the W-4 and tells you what to claim. This tool accounts for multiple jobs, a spouse's income, dependents, and other factors. Using the calculator takes about 10 minutes and can help you get closer to breaking even at tax time instead of owing or overpaying.

Changes to your W-4 take effect on the next paycheck after your employer processes the form, usually within one or two pay periods.

Frequently Asked Questions

Why is my California tax withholding higher than my federal withholding?

California's top state tax rate (13.3%) is higher than most federal tax brackets, and California has fewer deductions and credits than the federal system. If you earn a high income, state withholding can exceed federal withholding. Your W-4 adjustments affect both separately, so you can claim different amounts on each form.

Do I have to pay California income tax if I work remotely for a company in another state?

Yes, if you are a California resident, you owe California income tax on all income earned, regardless of where your employer is located or where the work is performed. Your employer should withhold California tax based on your residency.

What happens if my employer doesn't withhold enough tax?

You will owe the difference when you file your tax return. If you underpay by a large amount, you may also owe a penalty. Updating your W-4 to increase withholding can prevent this in future paychecks. The IRS withholding calculator can help you determine the right amount to claim.

Can I claim exempt from withholding in California?

Federal and California both allow you to claim exempt status on your W-4 if you had no tax liability last year and expect none this year. However, this status expires and must be renewed each year. Most people should not claim exempt unless they truly have no tax liability.

Does my employer's size affect how much tax is withheld?

No. The withholding calculation is the same whether you work for a small business or a large corporation. The only difference is how quickly your employer processes payroll and submits withheld taxes to the government.