Why CA SDI hits high earners hardest
SB 951 (effective 2024) removed the SDI wage cap. Pre-2024, SDI stopped at ~$153K of wages. Now it applies to every dollar — a $500K earner pays $5,500/yr in SDI alone, up from $1,683 in 2023.
The 13.3% myth
California's top rate is 12.3% (income tax) + 1% Mental Health Services Tax above $1M = 13.3%. But that only applies to income above $1M for singles. Most W2 earners cap at the 9.3% bracket which starts at $70.6K — the real CA pain point for tech workers.
RSU + AMT trap
Large RSU grants vesting in CA trigger AMT (Alternative Minimum Tax). Sell-to-cover withholds 22% federal but your marginal bracket is 32–37%. Underwithholding is the #1 surprise tax bill for FAANG employees.
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Read the guideFAQ
How does CA tax bonuses?
Same as wages at supplemental rate: 10.23% state withholding + 22% federal for bonuses <$1M (37% above). Withholding ≠ actual tax — you'll true up at filing.
Does CA tax 401k contributions?
Pre-tax 401(k) contributions reduce both federal and CA taxable income. Roth 401(k) doesn't. Mega-backdoor Roth (after-tax → Roth conversion) is a powerful tool for high CA earners with eligible plans.
Do I pay CA tax on out-of-state work?
Yes if you're a CA resident. CA taxes worldwide income for residents. Non-residents only pay on CA-source income. The 'leaving CA for tax purposes' bar is high — FTB audits aggressively.
New York City residents pay a separate city income tax; New York City take-home pay after city tax works it into the net figure.
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