California SDI is a payroll tax that funds disability and family leave insurance

State Disability Insurance (SDI) is a California payroll tax that appears as a deduction on your paycheck. The money goes into a state insurance fund that pays benefits to workers who cannot work because of a non-work injury or illness, or who need to take time off to care for a new child or family member. You do not pay this tax if you work in another state, and not all California workers pay it.

The tax rate changes each year. For 2024, the rate is 1.0 percent of your wages, up to a maximum taxable wage base set by the state. Your employer withholds this amount directly from your paycheck. Unlike federal income tax, you cannot deduct SDI contributions on your tax return — they are not a deduction, and they do not reduce your taxable income.

SDI is separate from Paid Family Leave (PFL), though both are funded through the same payroll deduction in California. The combined rate for SDI and PFL appears as one line item on your pay stub, labeled "SDI" or sometimes "CASDI" or "State Disability Insurance."

Key Takeaways

  • California SDI is a mandatory payroll tax that funds insurance for workers who cannot work due to illness, injury, or family care needs.
  • The tax rate for 2024 is 1.0 percent of your wages, withheld by your employer each pay period.
  • SDI contributions do not reduce your taxable income and cannot be deducted on your state or federal tax return.
  • You only pay SDI if you work in California; workers in other states do not pay this tax.
  • If you become unable to work, you can file a claim with the state to receive SDI benefits, which replace a portion of your lost wages.

Who pays California SDI tax

Most workers employed in California pay SDI tax. This includes employees, domestic workers, and some self-employed people who have elected coverage. You do not pay SDI if you are self-employed and have not elected coverage, if you work for the federal government, or if you are a state or local government employee covered by an alternative disability plan.

Some workers are exempt. These include employees of certain religious organizations, workers covered by a private plan that meets state requirements, and workers in states other than California. If your employer has a private disability plan that the state has approved as a substitute for SDI, you may pay into that plan instead of the state fund.

The tax applies to all wages you earn in California, up to the maximum taxable wage base. For 2024, that base is $153,164. Once your wages reach that amount in a calendar year, your employer stops withholding SDI tax for the rest of that year.

How much SDI tax comes out of your paycheck

The amount depends on your gross wages and the current tax rate. For 2024, the rate is 1.0 percent. If you earn $3,000 in a pay period, your SDI withholding is $30. If you earn $5,000, it is $50. Your employer calculates this and deducts it before you receive your paycheck.

The rate and the maximum taxable wage base change each year. The state announces the new rate and base in October for the following year. You can find the current rate on the California Employment Development Department (EDD) website. Your pay stub will show the exact amount withheld each pay period.

Once your cumulative wages in a calendar year reach the maximum taxable wage base, no more SDI tax is withheld. This means higher-earning workers stop paying SDI partway through the year, while lower-wage workers pay it on all their earnings for the full year.

What SDI tax pays for

SDI tax funds two types of benefits. State Disability Insurance (SDI) pays workers who cannot work because of a non-work-related illness or injury — for example, surgery recovery, a broken bone from a fall, or a medical condition that prevents you from working. Paid Family Leave (PFL) pays workers who take time off to bond with a new child, care for a seriously ill family member, or handle a military family member's may have access to exigency.

Both benefits replace a portion of your lost wages. The benefit amount is typically 55 to 60 percent of your average weekly wage, up to a maximum amount set by the state. Benefits are not full wage replacement — they are designed to help you cover basic expenses while you are unable to work or taking leave.

To receive benefits, you must file a claim with the California EDD. The state will review your claim, verify that you meet the requirements, and determine how much you are may have access to to receive. The process typically takes two to three weeks from the time you file.

The difference between SDI tax and income tax withholding

SDI is a separate tax from federal and state income tax withholding. All three appear as deductions on your paycheck, but they fund different programs and have different rules. Federal income tax withholding goes to the U.S. Treasury and funds federal government operations. California state income tax withholding goes to the state general fund. SDI withholding goes specifically to the state disability insurance fund.

Unlike income tax, SDI is not based on your filing status, dependents, or tax deductions. It is a flat percentage of your wages, up to the maximum taxable wage base. You cannot adjust your SDI withholding by claiming exemptions or changing your W-4 form. The amount is determined by law and does not change based on your personal tax situation.

SDI contributions also do not appear as a deduction on your tax return. You cannot reduce your taxable income by claiming SDI as a deduction. This means you may owe income tax on wages that were reduced by SDI withholding.

How to check your SDI withholding on your pay stub

Your pay stub lists SDI withholding as a separate line item. It may be labeled "SDI," "CASDI," "State Disability Insurance," or "Disability Insurance." The amount shown is the tax withheld from that pay period. If you receive multiple paychecks per year, add up the SDI amounts from each stub to see your total annual SDI tax paid.

If you notice that SDI is not being withheld and you believe it should be, contact your employer's payroll department. If you work for a private employer and your employer has a state-approved private plan, you may be paying into that plan instead. If you work for a government agency, you may be covered by an alternative plan that does not use SDI.

You can also contact the California EDD directly if you have questions about whether you should be paying SDI or if you believe your withholding is incorrect. The EDD can verify your employment status and confirm what you should be paying.

What happens if you stop working or change jobs

If you stop working or change jobs, your new employer begins withholding SDI based on your wages at that job. There is no carryover or refund of SDI tax from one job to another. Each employer withholds based on the wages you earn from them.

If you work multiple jobs in California in the same year, you pay SDI on wages from each job, up to the maximum taxable wage base. This means you could pay more in total SDI tax than if you worked only one job, because the maximum applies to each employer separately, not to your total income. However, you can request a refund of excess SDI tax when you file your state tax return if you have overpaid.

If you leave California and move to another state, you no longer pay California SDI tax on wages earned in the new state. You may be subject to that state's disability insurance tax or unemployment insurance tax instead, depending on the state's requirements.

Frequently Asked Questions

Can I get a refund of SDI tax I paid?

You cannot get a refund of SDI tax during the year. However, if you overpaid — for example, because you worked multiple jobs and paid SDI on wages above the maximum taxable wage base — you can claim a refund when you file your California state tax return. You will need to provide documentation of your wages and SDI payments from each employer.

What if I am self-employed — do I have to pay SDI?

Self-employed workers do not pay SDI automatically. However, you can elect to pay into the SDI program to become covered. If you elect coverage, you pay both the employee and employer portion of the tax. You must make this election with the California EDD and pay quarterly or annually.

Does SDI tax reduce my taxable income for federal taxes?

No. SDI tax does not reduce your federal taxable income. You pay federal income tax on your full gross wages, even though SDI was withheld from your paycheck. SDI is not a deductible expense on your federal tax return.

What is the maximum amount of SDI tax I will pay in a year?

For 2024, the maximum taxable wage base is $153,164. At the current rate of 1.0 percent, the maximum SDI tax you can pay in a year is approximately $1,531.64. Once your cumulative wages reach the base, your employer stops withholding SDI for the rest of that year.

If I receive SDI benefits, do I have to pay taxes on them?

SDI benefits are not subject to federal income tax. However, California state tax treatment may vary depending on your specific situation. If you receive benefits, the EDD will provide information about any tax obligations. You should consult a tax professional if you are unsure.