SDI is a payroll tax that funds short-term disability insurance in a few states
SDI stands for State Disability Insurance. It is a payroll tax deducted from your wages in California, New Jersey, New York, and Rhode Island. The money goes into a state fund that pays you a portion of your wages if you cannot work due to a non-work injury, illness, or pregnancy.
You will see SDI listed as a line item on your pay stub if you work in one of these four states. The amount varies by state and by your income level. Unlike federal taxes, SDI is not withheld from every worker's paycheck nationwide — only workers in states that run their own disability insurance programs pay it.
SDI is separate from Social Security, workers' compensation, and unemployment insurance. Each program covers different situations. SDI specifically covers temporary disabilities that prevent you from working, whether you were injured at work or not.
Key Takeaways
- SDI tax is withheld from your paycheck only in California, New Jersey, New York, and Rhode Island.
- The tax funds a state insurance program that replaces part of your income if you are temporarily unable to work due to illness, injury, or pregnancy.
- SDI tax rates and wage bases differ by state and change annually.
- You do not pay SDI tax on income above a certain threshold, which varies by state each year.
How much SDI tax comes out of your paycheck
The SDI tax rate and the maximum wages subject to the tax change every year. In 2024, California's rate was 1.0% of wages up to a maximum annual wage base. New Jersey, New York, and Rhode Island each have different rates and wage bases.
For example, if you earn $50,000 per year in California, you would pay SDI tax on all $50,000 (assuming the wage base is higher). If you earn $200,000, you would pay SDI tax only on the portion up to that year's wage base cap, not on the full amount.
Your employer does not match SDI contributions the way they do with Social Security. SDI is entirely funded by the employee's payroll deduction. Some states allow employers to run private disability insurance plans instead, but most workers pay the state SDI tax.
What SDI actually pays you
If you become temporarily unable to work, you can file a claim with your state's disability insurance program. The program will pay you a percentage of your regular wages — typically 50% to 70%, depending on your state and income level.
SDI covers situations like recovery from surgery, pregnancy and childbirth, serious illness, or a non-work injury. It does not cover job loss, and it does not cover injuries that happened at work (those are covered by workers' compensation instead).
Benefits are temporary, usually lasting up to 26 weeks in most states, though some states allow extensions. You must be unable to work during the entire period you receive benefits. If you return to work part-time, your benefit amount may be reduced.
How to file an SDI claim
To receive SDI benefits, you must file a claim with your state's disability insurance office. In California, this is the Employment Development Department (EDD). In New Jersey, it is the Division of Temporary Disability Insurance. Each state has its own process and forms.
You will need your Social Security number, driver's license or ID, information about your employer, and medical documentation of your disability. Your doctor must certify that you are unable to work and provide an expected return-to-work date.
Processing times vary. Most states aim to process claims within two to three weeks, but it can take longer if additional information is needed. You can check your claim status online through your state's portal or by calling the disability insurance office.
SDI versus other payroll taxes and insurance programs
SDI is often confused with other deductions because multiple programs come out of your paycheck. Social Security and Medicare are federal taxes that apply everywhere. Unemployment insurance is also state-run but covers job loss, not disability. Workers' compensation covers work-related injuries only.
If you are injured at work, you file a workers' compensation claim, not an SDI claim. If you lose your job, you file for unemployment, not SDI. SDI is specifically for temporary disabilities that are not work-related and that prevent you from working at all.
Some states also have Paid Family Leave programs, which are sometimes funded through SDI or a separate payroll tax. Paid Family Leave covers time off to care for a newborn, adopted child, or seriously ill family member — situations SDI does not cover.
States that do not have SDI
Most states do not have a state disability insurance program. Workers in those states have no SDI tax on their paychecks. If they become temporarily disabled, they may be able to purchase private disability insurance, but there is no government-funded program.
Some employers in non-SDI states offer short-term disability insurance as a voluntary benefit. You can choose to enroll and pay a premium, but it is not mandatory. The coverage and benefits depend on the specific plan your employer offers.
Frequently Asked Questions
Why do I see SDI on my pay stub if I do not live in California, New Jersey, New York, or Rhode Island?
You should not see SDI if you work in another state. If you do, check whether you recently moved or changed jobs. If you work remotely for a company based in an SDI state, your employer may be withholding SDI tax based on where the company is located, not where you live. Contact your payroll department to clarify.
Can I get SDI benefits if I am self-employed?
In most states, self-employed workers do not pay SDI tax and cannot receive SDI benefits. California allows some self-employed workers to opt into the program voluntarily. Check with your state's disability insurance office about your specific situation.
What happens to my SDI tax if I do not use it?
SDI tax is not a personal savings account. The money goes into a state insurance fund that pays all workers who file claims. If you never file a claim, you do not get a refund of your SDI contributions. The tax funds the program for everyone who needs it.
Do I have to pay SDI tax on all my income?
No. Each state sets a maximum wage base — an income threshold above which SDI tax is not withheld. Once you earn above that amount in a calendar year, your employer stops taking out SDI. The wage base changes every year and varies by state.
Can my employer refuse to withhold SDI?
No. In SDI states, employers are required by law to withhold SDI tax from employee paychecks. Some states allow employers to run approved private disability plans instead, but if your employer does not have one, SDI withholding is mandatory.