The California SDI tax is a mandatory payroll deduction that funds short-term wage replacement when you can’t work. For 2026, your employer withholds 1.3 percent of every dollar you earn and sends it to the Employment Development Department (EDD).1Employment Development Department. Tax-Rated Employers That money pays for two programs you can draw on later: Disability Insurance, if a non-work illness or injury keeps you off the job, and Paid Family Leave, if you need time to bond with a new child or care for a seriously ill family member. Unlike unemployment insurance, which employers fund, SDI comes entirely out of your paycheck.
How Much Comes Out of Your Paycheck
The 1.3 percent rate applies to all of your wages. There is no annual wage ceiling. California eliminated the SDI wage cap effective January 1, 2024, so the deduction now runs on every dollar you earn for the year.1Employment Development Department. Tax-Rated Employers
The rate itself can change each year. The EDD resets it based on the SDI Fund balance and projected benefit payouts, and by statute it has to stay between 0.1 percent and 1.5 percent.2California Legislative Information. California Code Unemployment Insurance Code 984 – Contribution Rates
For high earners, removing the cap was a real change. Someone making $300,000 pays $3,900 in SDI for 2026, compared with roughly $1,600 under the old capped structure. You don’t file or remit anything yourself. Check your pay stub to confirm the deduction is showing up, and confirm the year-to-date figure matches 1.3 percent of your gross wages.
What the Tax Actually Pays For
Your contributions fund two separate benefit programs administered by the EDD.
Disability Insurance
Disability Insurance (DI) replaces part of your wages when you can’t do your regular job because of a non-work-related illness, injury, or pregnancy.3California Legislative Information. California Code Unemployment Insurance Code 2601 The “non-work-related” piece matters. If you’re hurt on the job, that’s workers’ compensation, a separate system funded by your employer. DI covers everything else that keeps you off work for more than a week: surgery recovery, a complicated pregnancy, a serious illness.
Paid Family Leave
Paid Family Leave (PFL) replaces part of your wages when you take time off to bond with a new child (including adopted or foster children), care for a seriously ill family member, or handle certain situations tied to a family member’s military deployment.4California Legislative Information. California Code Unemployment Insurance Code 3300 – Paid Family Leave PFL pays you, but it doesn’t protect your job on its own. Job protection has to come from something else, like the California Family Rights Act or federal FMLA, running alongside your PFL claim.
What You’d Actually Receive
Both DI and PFL pay roughly 70 to 90 percent of the wages you earned 5 to 18 months before your claim, with lower-wage workers getting the higher replacement percentage. The weekly benefit maxes out at $1,765.5Employment Development Department. Calculating DI Benefit Payment Amounts
Duration differs by program. DI benefits can run up to 52 weeks.5Employment Development Department. Calculating DI Benefit Payment Amounts PFL caps at 8 weeks within any 12-month period.6Employment Development Department. Paid Family Leave DI also has a seven-day unpaid waiting period at the start of a claim, so the first day the state actually pays you is the eighth day of your disability.7Employment Development Department. Disability Insurance Claim Process
You have to have earned at least $300 in wages with SDI withheld during your base period to qualify for benefits at all.8Employment Development Department. Disability Insurance – Eligibility FAQs The minimum weekly benefit is $50; the maximum is the $1,765 figure above.
Who Doesn’t Pay SDI
Most California employees pay SDI. A few categories don’t.
- Federal employees are fully exempt. California personal income tax is still withheld for federal workers in the state, but SDI is not.9Employment Development Department. DE 231EE – Exempt Employment
- Some California state employees contribute to Non-Industrial Disability Insurance (NDI) rather than SDI. Elected officials and members of legislative bodies are also exempt.9Employment Development Department. DE 231EE – Exempt Employment
- Employees of other states or their political subdivisions who perform services in California are exempt.
- Members of religious groups that rely on prayer for healing can file a statement with the EDD and their employer disclaiming SDI benefits. The exemption is permanent for the wages it covers: you give up all rights to collect DI or PFL on them.10California Legislative Information. California Code Unemployment Insurance Code 2902
Self-employed workers aren’t automatically covered either, but they can opt in through Disability Insurance Elective Coverage (DIEC).11California Legislative Information. California Code Unemployment Insurance Code 708.5 The premiums are much higher than what W-2 employees pay: 8.84 percent of prior-year net profit for 2026, with a flat $406.64 annual premium if your net profit was $4,600 or less.12Employment Development Department. Disability Elective Coverage Benefits and Premium Amounts Compare that against a private disability policy before you sign up.
When Your Employer Uses a Voluntary Plan
Some employers run a Voluntary Plan (VP) instead of routing your contributions to the state. A VP has to provide at least the same benefits as SDI plus at least one benefit that’s better, and it can’t cost you more than the standard SDI rate.13Employment Development Department. Become a Voluntary Plan Employer
Your employer can’t switch unilaterally. A majority of eligible employees must approve the plan, and any individual worker can reject the VP and stay on state-managed SDI. If you opt out, your employer sends your contributions to the EDD on your behalf.14Employment Development Department. Voluntary Plan If you’re on a VP, you should have a written plan document. Read it against the standard SDI schedule to confirm you’re actually getting more.
Are the Benefits Taxable Later
Tax treatment depends on which program pays you. PFL benefits are taxable federally. The EDD issues a Form 1099G showing the year’s PFL payments, and you report that as income on your federal return. California does not tax PFL at the state level.15Employment Development Department. Tax Information (Form 1099G)
DI benefits follow different rules. California doesn’t tax them, and in most cases they aren’t federally taxable either. The exception is if your employer paid into a disability plan on your behalf, or if you’re receiving benefits as a substitute for unemployment compensation. For the typical employee whose SDI was withheld from wages, DI benefits are tax-free at both levels. If your situation is unusual, look at IRS Publication 525.
One more thing on the paying-in side: SDI contributions you pay during the year can be deductible on your federal return if you itemize, because they’re treated as state taxes paid. Most people take the standard deduction and won’t see any effect. High earners who itemize, and who are now paying SDI on every dollar without a cap, may pick up a meaningful deduction.