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Until 2023, California State Disability Insurance was charged only on wages up to an annual ceiling — around $153,000 — so anyone earning above that paid a fixed maximum and nothing more. Senate Bill 951 removed that ceiling with effect from January 2024.

The result is a deduction that now behaves like an uncapped flat tax. At the 2026 rate of 1.3%, someone earning $75,000 pays around $975; someone earning $400,000 pays over $5,200, where previously they would have paid the same capped amount as a $153,000 earner. For high earners this was one of the largest effective tax increases in the state in years, and because it arrives as a payroll line rather than an income tax rate change, many people did not notice it happen.

SDI funds both disability benefits and Paid Family Leave, and the same legislation raised wage replacement rates substantially, so the deduction buys more than it used to. But for take-home pay purposes it is simply another percentage off the top, applied to every dollar.

California's headline 13.3% rate is widely quoted and rarely paid — it applies only to income above $1 million, and includes the 1% Mental Health Services Tax surcharge layered on the top band. For ordinary salaries the picture is much gentler than the headline suggests.

The brackets are unusually compressed at the bottom: the 1%, 2%, 4% and 6% bands are exhausted within the first $57,000 or so of taxable income, which means a middle-income Californian reaches the 8% or 9.3% band quickly. Above roughly $73,000 of taxable income, most additional earnings are taxed at 9.3% until the high-income bands begin above $371,000.

California also indexes its brackets to inflation annually, so thresholds shift each year. The standard deduction, by contrast, is small — a fraction of the federal figure — which is why California taxable income is usually much closer to gross pay than federal taxable income is.

For all its reputation, California has no local income tax. San Francisco, Los Angeles and San Diego all withhold nothing beyond the state rate, which makes California simpler on the payslip than Ohio, Pennsylvania or Maryland despite being far more expensive overall.

California also does not tax Social Security benefits, which is unusual for a high-tax state. Other retirement income, including 401(k) and IRA distributions, is fully taxable at ordinary rates, and California has no preferential rate for long-term capital gains — they are taxed as ordinary income, which is a meaningful consideration for anyone with significant investments.

Pre-tax 401(k) contributions reduce California taxable income as well as federal, so raising your contribution rate saves tax twice. They do not reduce SDI, which is charged on gross wages.