Learn how California State Disability Insurance works, who pays SDI, the 2026 withholding rate, covered wages, benefits, and payroll reporting.
California State Disability Insurance (SDI) is a state program providing short-term wage-replacement benefits through Disability Insurance and Paid Family Leave. For most covered employees, employers withhold the SDI contribution from wages and remit it to EDD. SDI is not workers' compensation, unemployment insurance, employer-paid sick leave, or permanent disability coverage.
For 2026, the employee SDI contribution rate is 1.3%. California eliminated the SDI taxable wage ceiling beginning January 1, 2024, so all covered wages are subject to the contribution and there is no maximum annual employee contribution.
Disability Insurance may provide benefits when an eligible worker cannot perform regular work because of a non-work-related illness, injury, pregnancy, or childbirth. Paid Family Leave may provide benefits when an eligible worker takes time to care for a seriously ill family member, bond with a new child, or participate in a qualifying military-assist event.
SDI provides partial wage replacement; it does not itself guarantee job protection. Job-protected leave may arise under the California Family Rights Act, federal Family and Medical Leave Act, Pregnancy Disability Leave law, or another rule. Eligibility for benefits and a right to return to the same job are different questions.
The ordinary payroll calculation is:
Covered SDI wages × annual SDI rate = employee SDI withholding
If a covered employee earns $45,000 in one quarter during 2026:
$45,000 × 1.3% = $585
If the employee earns $180,000 over the year:
$180,000 × 1.3% = $2,340
Because there is no 2026 wage ceiling, withholding does not stop after the employee reaches a particular wage amount. Payroll systems should not retain an obsolete pre-2024 cap.
SDI is generally deducted from the covered employee's gross wages. It is not ordinarily an additional employer contribution like UI or ETT. Employers hold the deducted amount as a payroll liability and remit it to EDD. Pay stubs often label it CASDI.
Some employees are covered by an approved voluntary plan instead of the state plan. Certain workers or services may be excluded, and eligible self-employed people can apply for Disability Insurance Elective Coverage. Employers should determine coverage from EDD rules rather than assuming every payment labeled "wages" has identical treatment.
An SDI claim is based on wages in a statutory base period, not simply the employee's current paycheck. For 2026, the maximum weekly benefit amount is $1,765. Actual benefits depend on the claimant's highest-quarter base-period wages and applicable replacement percentage. Current benefit calculations generally replace about 70% to 90% of wages, with higher replacement percentages for lower-paid workers.
An employee generally files a benefit claim with EDD and supplies required medical or family-leave information. The employer reports wages and responds to EDD requests but should not decide whether the worker qualifies. Benefit payments and payroll withholding belong to different workflows.
Employers report covered wages and SDI withholding through California payroll filings, including DE 9 and DE 9C, and deposit withheld SDI with PIT according to the applicable deposit schedule. The general ledger should separately track gross wages, employee SDI withheld, PIT withheld, employer UI, employer ETT, and net pay.
Reconcile every quarter. For example, 1.3% of covered 2026 wages should generally agree with SDI withholding, subject to rounding, excluded wages, corrections, or voluntary-plan treatment. A difference can signal a wrong taxability setting, an outdated wage ceiling, or a payroll correction that did not reach the return.
At year-end, California SDI withheld is generally reported on Form W-2. Employees who had multiple employers can sometimes have excess SDI withheld because each employer correctly withheld without knowing the employee's wages elsewhere. The employee may claim the permitted credit on the California return when requirements are met. If one employer withheld too much, the employer generally must correct it rather than shifting the issue to the employee's return.
SDI is the umbrella funding and benefit system. Disability Insurance addresses the worker's own non-work-related condition. Paid Family Leave addresses care, bonding, and military-assist needs. Workers' compensation generally concerns work-related injury or illness. UI concerns qualifying unemployment. Employer sick leave is compensation under employment law, not an EDD SDI benefit.
Keep payroll registers, wage and taxability detail, DE 9 and DE 9C filings, deposit confirmations, W-2 files, voluntary-plan documentation, notices, and correction records. Review SDI setup when hiring the first employee, changing payroll software, acquiring a business, adding an employee class, or receiving an EDD discrepancy notice.
Employees should check claim dates carefully because the start date determines the base period. They should also coordinate PFL or DI benefits with paid time off and other income under current EDD rules.
Heath Income Tax helps California employers review payroll-tax setup, reconcile liabilities, and keep wage records aligned with EDD filings and year-end forms.
What is the California SDI rate for 2026?
The employee withholding rate is 1.3% of covered wages.
Is there a 2026 SDI wage limit?
No. All covered wages are subject to SDI contributions, and there is no maximum contribution.
Does the employer pay SDI?
The contribution is generally withheld from the employee. Employer-paid UI and ETT are separate.
Does SDI include Paid Family Leave?
Yes. The SDI contribution supports both Disability Insurance and PFL benefits.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
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