California State Tax Withholding Explained (DE 4 and Your W-2)
Two California deductions come out of every paycheck: state income tax and SDI. You control the first one, and it decides whether you get a refund.
California income tax withheld from your pay is set by Form DE 4 (the state version of the W-4). You can claim allowances or ask for extra withholding. Separately, SDI is withheld at a flat 1.3% of all wages. Bonuses and stock options paid separately are usually withheld at a flat 10.23%, and other supplemental pay at 6.6%.
What the DE 4 is and why California has its own
Since the federal W-4 was redesigned in 2020, it no longer uses allowances, but California withholding still does. So California has its own form, the DE 4, Employee's Withholding Allowance Certificate. If you don't give your employer a DE 4, your employer must withhold California tax as Single with zero allowances, which usually withholds more, not less.
Allowances and extra withholding
Each allowance you claim on the DE 4 lowers the amount withheld from each check. The DE 4 worksheets base allowances on your filing status, dependents and expected deductions. If you have more than one job, a working spouse or significant income without withholding (freelance work, investments), claim fewer allowances or enter an additional dollar amount to withhold each pay period.
SDI is separate and not adjustable
State Disability Insurance is withheld at 1.3% of every dollar you earn. Since 2024 there has been no wage cap. It funds disability and Paid Family Leave benefits. It is not an income tax, the DE 4 doesn't change it, and it shows separately on your pay stub (and in box 14 of many W-2s).
Bonuses and other supplemental pay
When a bonus or stock option income is paid separately from regular wages, employers may withhold California tax at a flat 10.23%. Other supplemental payments, such as commissions, overtime paid separately or back pay in a lump sum, use a flat 6.6%. Alternatively, the employer can add the payment to regular wages and withhold normally. This is only withholding: the actual tax is settled on your return, so a large bonus can still leave you owing or owed.
Where to find it on your W-2
Box 16 shows your California wages and box 17 shows California income tax withheld. When you file, the FTB compares your actual tax with box 17 plus any estimated payments. The difference is your refund or balance due.
How to check and fix your withholding
- Look at year-to-date California withholding on a recent pay stub and project it to December.
- Estimate your California tax for the year with the state income tax calculator, or compare both directly in the tax refund calculator.
- If withholding will fall short, give your employer a new DE 4 with fewer allowances or an extra amount per paycheck. If you earn self-employment income, make estimated payments instead.
See your take-home pay
The CA Paycheck Calculator shows how state income tax and SDI come out of your gross pay.
Frequently Asked Questions
What is the DE 4 form in California?
The Employee's Withholding Allowance Certificate that tells your employer how much California income tax to withhold. California uses it instead of the federal W-4 because California withholding still uses allowances.
What happens if I do not fill out a DE 4?
Your employer must withhold California tax as if you were single with zero allowances, which usually takes out more than necessary. You can submit a DE 4 at any time to change it.
What is the California withholding rate on bonuses?
When a bonus or stock option income is paid separately from regular wages, employers may withhold California income tax at a flat 10.23%. Other supplemental wages use a flat 6.6%. The final tax is settled on your return.
How much SDI is taken out of my paycheck in California?
SDI is withheld at 1.3% of all wages in 2026, with no wage cap since 2024. It funds State Disability Insurance and Paid Family Leave.
How do I avoid owing California taxes?
Make sure your withholding (W-2 box 17) plus any estimated payments covers your expected tax. Submit a new DE 4 with fewer allowances or an additional amount if you have multiple jobs, a working spouse or untaxed income.
This article is for general information only and is not tax advice. The DE 4 worksheets and EDD withholding schedules determine your exact withholding.