Independent Contractor Taxes in California: Everything You Need to Know
Working as or hiring independent contractors in California comes with unique tax requirements. This guide covers everything CSLB-licensed contractors need to know about California independent contractor taxes.
Need help? Call Bookkeeping Champs at (818) 679-4451 — serving LA, Ventura, and Kern County contractors exclusively.
What Taxes Do Independent Contractors Pay in California?
1. Self-Employment Tax (15.3%)
Self-employed contractors pay both the employee and employer portions of Social Security (12.4%) and Medicare (2.9%). On $100,000 net profit, that’s $14,130 in SE tax before a dollar of income tax.
2. Federal Income Tax
Federal income tax varies from 10% to 37%. Most California working contractors land in the 22%–24% bracket.
3. California State Income Tax
California has the highest marginal income tax rate in the country at 13.3%. Most LA/SFV/Ventura area contractors pay 9.3%–10.3% on net contractor income.
California Quarterly Estimated Tax Payments
California independent contractors must make quarterly estimated tax payments to both the IRS and California FTB. California’s schedule: Q1 April 15, Q2 June 15 (70% of CA tax due by this date), Q3 September 15, Q4 January 15. Missing payments triggers underpayment penalties.
Top Tax Deductions for California Contractors
- Vehicle and equipment: Section 179, bonus depreciation, standard mileage
- Tools and supplies: Everything used on the job
- Insurance: GL, workers’ comp, health insurance (100% deductible)
- Subcontractor costs: Fully deductible
- Home office: Percentage of dedicated workspace
- Professional development: CSLB license renewal, continuing education
- Bookkeeping services: 100% deductible — like Bookkeeping Champs
How Much Should a California Contractor Set Aside for Taxes?
Set aside 30–35% of net profit for taxes: SE tax (~14%) + federal income (~22–24%) + California income (~9–10%), minus deductions and 20% QBI deduction savings. Open a separate savings account and transfer 30% of every payment received.
Frequently Asked Questions
Can I reduce self-employment tax by incorporating?
Yes — S-Corp election can save significantly on SE tax when net profit exceeds ~$40,000/year. SE tax only applies to salary, not S-Corp distributions. Call us to see if this makes sense for your contracting business.
Does California tax contractors differently than other states?
Yes. California has the highest income tax rates nationally and stricter worker classification rules (AB 5). Working with a California-specialized bookkeeper is essential for CSLB contractors.
What if I’m behind on California estimated taxes?
File and pay as much as possible immediately. The penalty for late payment is 0.5% per month in California. Ignoring filings triggers additional failure-to-file penalties. Call (818) 679-4451 for help catching up.
Bookkeeping Champs handles quarterly tax planning, bookkeeping, and compliance exclusively for CSLB-licensed contractors in LA County, Ventura County, and Kern County. Call (818) 679-4451 or schedule a free consultation.