Four payroll taxes. Most California employers discover all of them at once — when the EDD notice lands. Understanding California payroll taxes 2026 means knowing what you owe, what you withhold, and exactly when you pay it. If you have even one employee, every one of these applies to you.
- CA has 4 payroll taxes: SDI, PIT, SUI, and ETT — you handle all four as the employer.
- SDI is ~1.1% with no wage cap — it applies to every dollar an employee earns.
- New employers pay 3.4% SUI + 0.1% ETT on the first $7,000 of each employee's wages.
- Most small employers deposit quarterly and file the DE 9 return four times a year.
- PIT withholding is based on the employee's DE 4 form — not the federal W-4.
California Payroll Tax Rates at a Glance (2026)
Two taxes come out of your pocket. Two come out of your employee's paycheck. Here's every rate, every base, one place:
| Tax | Who Pays | 2026 Rate | Wage Base |
|---|---|---|---|
| SDI (State Disability Insurance) | Employee (withheld) | ~1.1%* | No cap (unlimited) |
| PIT (Personal Income Tax) | Employee (withheld) | Varies (EDD tables) | No cap |
| SUI (State Unemployment Insurance) | Employer | 3.4% (new employer) | First $7,000/employee |
| ETT (Employment Training Tax) | Employer | 0.1% | First $7,000/employee |
*Confirm the current SDI rate at edd.ca.gov — EDD adjusts it annually. The rate has held at approximately 1.1% since the wage cap was removed in 2024.
Running federal and state payroll simultaneously? Our breakdown of Form 941 employer quarterly tax returns covers what you owe the IRS each quarter.
How to Withhold and Deposit California Payroll Taxes Step by Step
Five steps. Repeat every pay period. That's the entire system for most small employers.
"The most expensive CA payroll mistake isn't a miscalculation — it's skipping SDI withholding entirely. It's mandatory, every pay period, no exceptions."
Before processing your first run, the payroll mistakes small businesses most commonly make is required reading. The errors that trigger EDD notices are almost always preventable.
SDI in 2026: What Changed and What You Actually Owe
SDI generates more questions than any other California payroll line item. The law changed in 2024 and a surprising number of employers are still running the old rules.
California's SB 951, effective January 1, 2024, eliminated the SDI taxable wage ceiling entirely. Before that, SDI only applied to wages up to a fixed annual cap. Gone. It now hits every dollar an employee earns — no ceiling whatsoever. The rate itself floats annually; EDD sets it based on the SDI fund balance. Always verify the current figure at edd.ca.gov before running payroll. Don't guess.
Unlike most states, California SDI has no wage ceiling in 2026 — it applies to all employee wages, regardless of earnings. An employee making $200,000 pays SDI on every dollar. Budget for it on your highest-paid people, not just entry-level staff.
California's SDI fund also bankrolls Paid Family Leave (PFL) — up to 8 weeks of partial pay for eligible employees bonding with a new child or caring for a seriously ill family member. The same SDI withholding funds both programs. You don't pay anything extra for PFL.
For perspective on how California stacks up against its neighbors, Oregon's payroll tax structure takes a notably different approach. California is among the most complex states for payroll — but the setup is a one-time lift.
California Payroll Compliance Checklist for Small Employers
Six items. Check each one off before your first quarterly filing and you've covered the compliance fundamentals every CA employer needs:
New to running payroll from scratch? Small Business Payroll 101 covers the fundamentals before the state-specific rules kick in. Read it before your first quarterly filing.
California runs four payroll taxes with zero tolerance for guesswork. SDI and PIT come from employee paychecks; SUI and ETT come from your business. Most small employers file the DE 9 quarterly and deposit on the same schedule — manageable once the system is built. The single most important update for 2026: SDI applies to all wages with no cap. Budget for it on every dollar you pay.
Frequently Asked Questions
What is the California SDI rate for 2026?
Approximately 1.1% — but EDD sets the rate annually based on the SDI fund balance, so verify the current figure at edd.ca.gov before processing payroll. Since SB 951 removed the wage ceiling in 2024, there is no upper limit on wages subject to SDI withholding.
Do I need to pay SUI taxes as a new employer in California?
Yes. New California employers pay SUI at a default rate of 3.4%, plus ETT at 0.1%, on each employee's first $7,000 in wages for the year. After two to three years of employment history, the EDD assigns an experience-rated SUI rate based on your layoff record — it can move up or down from 3.4%.
How often do small employers deposit California payroll taxes?
Quarterly, for most. If your total CA payroll tax liability is under $350 per quarter, you remit and file the DE 9 four times a year. Exceed that threshold and the EDD moves you to a more frequent deposit schedule. All deposits go through the EDD's e-Services for Business portal.
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California's 2026 payroll tax picture for small employers:
- SUI: 3.4% new-employer rate on first $7,000 per employee
- ETT: 0.1% on first $7,000 per employee
- SDI: ~1.1% on all wages — no cap since SB 951
- PIT Withholding: Based on DE 4 elections; remit per EDD schedule
Always verify current rates at edd.ca.gov before each payroll run — SDI and SUI rates are reset annually.