When you work in California, you'll notice several items deducted from your pay. Some deductions are mandatory, and nearly every person who works for a private or public California employer has the same types of deductions. Other deductions from your pay may be voluntary and based on decisions you make to purchase benefits through your company. An exception applies to those who are considered contract or self-employed workers. These workers are responsible for remitting any required taxes on their own, rather than have them deducted by an employer.
Paycheck deductions in California include mandatory taxes, such as federal, state, SDI, Social Security and Medicare; and voluntary deductions such as health insurance payments and retirement plan contributions.
Social Security and Medicare
If you're employed by a private company, Social Security and Medicare taxes are deducted from your California wages. These taxes are deducted at flat-rate percentages from your gross pay before other deductions or taxes are subtracted. If you work as a public employee, such as a teacher, law enforcement officer or librarian, you may have Public Employee Retirement System, or CalPERS, contributions deducted instead of Social Security and Medicare.
Each of these helps fund programs that pay retirement benefits, and your contributions also earn you credits for your own future benefits. Social Security is withheld at 6.2 percent and Medicare is withheld at 1.45 percent. If you have PERS deducted, the withholding percentage may fluctuate depending on your job classification and legislative changes. As of 2015, the general percentages range from 7 to 11 percent.
Federal and State Income Taxes
Federal and California state income taxes are also deducted from your pay. Your state income tax deduction is based on a withholding allowance certificate called a W-4 form that you complete and provide to your employer. On the W-4, you will claim a filing status -- either single or married -- and a number of exemptions based on dependent children, the number of jobs you have and whether you are married and plan to file a joint return.
The information you provide on this form tells your employer only the rate at which to withhold taxes; it does not necessarily have to do with items you actually claim on your tax return at the end of the year. You can also change your W-4 information any time to adjust the federal and California state taxes deducted from your pay.
California Disability Insurance
California requires all workers to contribute to the State Disability Insurance fund. This fund pays benefits to workers who are displaced due to a non-work-related short-term disability, such as pregnancy, injury or illness. in 2019, California SDI is withheld at a rate of 1 percent of your gross taxable wages, not to exceed $1,183.71 per employee.
Other California Paycheck Deductions
Aside from mandatory deductions for taxes and SDI, you may elect to have other items deducted from your pay. Examples of voluntary deductions include health insurance, supplemental insurance, life insurance and retirement plan contributions. Some elected deductions are pre-tax benefits, which means your employer subtracts the benefit amount from your gross wages before your federal and California state income taxes are calculated.
With pre-tax deductions, you do not pay income tax on the money used to purchase the benefits. Other voluntary deductions are post-tax deductions, which means your employer subtracts the cost of the benefit from your net wages -- the amount of pay left after taxes and pre-tax deductions are subtracted.