Overview

California State Disability Insurance (SDI), often labeled CASDI on paystubs, is an employee-paid payroll deduction. It funds two state benefits: Disability Insurance (DI) and Paid Family Leave (PFL).

Employers must withhold CASDI from subject wages and remit it to the Employment Development Department (EDD). Employees see the deduction as CASDI/SDI/VPDI on their paystubs. For program basics, see the EDD overview: California SDI.

CASDI sits alongside other California payroll taxes like Unemployment Insurance (UI), Employment Training Tax (ETT), and California Personal Income Tax (PIT). Unlike those, SDI is generally paid by employees, not employers.

The SDI withholding rate—and whether a taxable wage limit applies—are set by EDD annually. Confirm current-year figures before running payroll or estimating refunds at EDD Payroll Tax Rates.

Tip: Don’t assume last year’s settings; small annual changes can alter maximum withholdings materially.

CASDI basics: what it funds and how it appears on your paycheck

CASDI finances two EDD-administered programs: DI for non-work-related illness, injury, or pregnancy. It also funds PFL for bonding with a new child or caring for a seriously ill family member.

Both benefits come from the same employee payroll deduction. You claim benefits directly with EDD rather than through your employer (see California SDI).

On a paycheck, the deduction typically appears as “CASDI,” “CA SDI,” “SDI,” or “VPDI” (if your employer runs an approved voluntary plan). The amount withheld is a flat percentage of SDI‑subject wages for that pay period.

In years when EDD sets a taxable wage limit, withholding stops when your year‑to‑date subject wages reach that limit. If you don’t see CASDI on your stub and you’re a private‑sector California employee, ask payroll to confirm coverage and whether a voluntary plan applies. Missing SDI can disrupt eligibility for DI/PFL.

CASDI rate and wage base: how withholding is calculated

SDI is withheld each pay period at the EDD‑published rate multiplied by SDI‑subject wages. Withholding stops once the year‑to‑date SDI‑subject wages hit the annual cap, if a taxable wage limit applies for that year.

EDD publishes the rate and any cap (and the resulting maximum annual contribution) on its annual rate page: EDD Payroll Tax Rates.

Mechanically, per‑pay withholding equals SDI rate × SDI‑subject wages in that check. The cap—when in effect—applies on a calendar‑year basis.

For example, at a 1.1% rate and a hypothetical $150,000 wage limit, the maximum annual SDI would be $1,650. After that point, SDI stops for the rest of the year and resumes January 1.

If EDD does not set a wage limit for a given year, SDI applies to all subject wages with no stop. Employers should configure payroll to auto‑stop when a cap exists and restart on January 1. Employees who change jobs should expect each employer to withhold independently based on the wages they pay.

Which wages are subject to CASDI, including bonuses, tips, RSUs, and severance

CASDI generally follows the “subject wages” used for California UI. These include most cash compensation and many taxable fringe benefits.

In practice, regular pay, overtime, shift differentials, bonuses, commissions, cash tips reported to the employer, and severance/dismissal pay are typically subject to SDI. Equity taxed as wages—such as RSUs at vest and nonqualified stock options (NQSOs) at exercise—is SDI‑subject in the pay period it becomes taxable (see EDD wages subject to taxes).

A few edge rules help avoid surprises. Incentive stock options (ISOs) generally aren’t wage‑taxed at exercise. However, a disqualifying disposition that creates W‑2 wages is subject to SDI at that time.

Noncash fringe benefits included in W‑2 Box 1 wages are usually SDI‑subject. Because SDI definitions track UI in most cases, confirm ambiguous items against the EDD wage guide and your payroll provider’s SDI settings. Misclassifying supplemental or equity pay is a common cause of over‑ or under‑withholding.

Mid‑year cap mechanics, multiple jobs, and stop/start rules

When EDD sets a taxable wage limit for the year, SDI withholding stops automatically in the paycheck where your year‑to‑date subject wages cross that limit. Withholding then restarts on January 1.

If EDD does not set a wage limit for the year, the stop never occurs. SDI continues on all subject wages through year‑end (see current policy at EDD Payroll Tax Rates).

Employers do not coordinate caps across different employers. Each employer withholds up to the cap independently based solely on the wages they pay.

For multi‑job employees in a capped year, this can produce more than the statewide maximum when W‑2s are combined. The excess is reconciled on your California return.

To anticipate when a cap will be reached, track year‑to‑date SDI‑subject wages, not just gross pay. Variable items like bonuses or RSU vests can accelerate the stop date.

Payroll teams should validate stop/start logic across regular and supplemental runs. This helps prevent stale withholding into the next year.

Excess CASDI withheld: how to claim a refund on your California return

If you had more CASDI withheld than the annual maximum in a year with a taxable wage limit, claim the overage on Form 540. You do not request a separate refund from EDD.

In years without a wage limit, there is no “excess SDI” credit because contributions are uncapped. Check the current maximum and instructions in the FTB Form 540 instructions.

Follow these steps:

Example: You had $1,200 CASDI withheld at Job A and $900 at Job B; the annual maximum is $1,650. Your combined $2,100 exceeds the cap by $450. You claim $450 as a refundable credit on your Form 540.

Pitfall: Don’t include unrelated Box 14 items (e.g., HSA or 401(k) contributions). Include only CASDI/SDI/VPDI.

Is CASDI deductible on your federal return?

CASDI (including VPDI) generally counts as a state income tax for federal itemized deductions. If you itemize on Schedule A, you can include California SDI in your total state and local income taxes.

Deductions are subject to the $10,000 SALT cap ($5,000 if married filing separately). See the Instructions for Schedule A (Form 1040).

If you elect the optional state sales tax deduction instead of state income taxes, you cannot also deduct CASDI. Practically, many taxpayers taking the standard deduction won’t see a federal tax benefit from CASDI.

To deduct it, include your W‑2 state income tax withheld (Box 17) plus Box 14 CASDI/VPDI in your Schedule A computation. Be mindful of the SALT cap limit.

Tip: Tax software may not import Box 14 automatically. Manually add CASDI if you itemize so you don’t leave a deduction on the table.

Remote and multi‑state employment: when to withhold CASDI

CASDI is generally withheld on wages for services performed in California. If an employee works in California—even for an out‑of‑state employer—those wages are typically subject to SDI.

The employer must register with EDD and comply with California payroll tax rules. If services are performed entirely outside California and aren’t localized to the state, SDI may not apply to those wages. See EDD’s guidance for out‑of‑state employers: EDD guidance for out‑of‑state employers.

For remote teams, the deciding factor is where work is physically performed. A Nevada resident working in Los Angeles is SDI‑subject, while a California resident performing all services in Oregon is not.

When services are split across states, apply localization and base‑of‑operations tests. Most payroll platforms support state‑by‑state wage sourcing.

A common setup mistake is withholding California PIT but forgetting SDI. Both must be handled when wages are CA‑sourced.

Tip: Document an employee’s work locations and revisit sourcing if their work pattern changes midyear.

Special categories: S‑corp shareholders, partners, clergy, and household employees

S‑corp shareholder‑employees receiving W‑2 wages are generally subject to CASDI on those wages like any other employee.

Partners and many LLC members aren’t employees for SDI purposes and don’t have CASDI withheld. They can consider EDD’s elective coverage option to obtain DI/PFL protection for self‑employed income: Disability Insurance Elective Coverage (DIEC).

Clergy and certain employees of religious organizations may have special treatment under UI law. SDI coverage depends on whether the employment is considered subject wages under California rules.

Public sector employees are often not covered by CASDI and instead may receive Nonindustrial Disability Insurance (NDI) or employer‑specific plans. Coverage rules vary by agency and bargaining unit.

Household employers paying cash wages to domestic workers in California generally must register and withhold SDI once they meet EDD’s quarterly wage thresholds. Confirm thresholds and registration steps before the first payroll.

Tip: When in doubt about worker status, obtain a written determination or consult counsel. Misclassification can create retroactive SDI liabilities.

Employer compliance: EDD forms, deposit deadlines, and penalties

Employers must register with EDD, set up SDI withholding in payroll, deposit withheld taxes on schedule, and file wage reports. Deposits are made electronically according to your assigned deposit frequency.

Quarterly filings include the DE 9 (Quarterly Contribution Return) and DE 9C (Quarterly Report of Wages). These reconcile wages, PIT, UI, ETT, and SDI.

At year‑end, ensure W‑2 Box 14 reflects CASDI/VPDI so employees can claim any excess on their state return (when applicable).

Compliance also includes providing EDD’s DI and PFL notices/pamphlets at hire and when qualifying events occur. Employers must also post required workplace notices.

Penalties and interest can apply for late registration, late deposits, late or incorrect DE 9/DE 9C filings, and failure to furnish required information. Use e‑file/e‑pay to avoid timing errors and calendar quarter‑end due dates.

Tip: Reconcile payroll registers to DE 9/DE 9C each quarter. Catch SDI variances early rather than at W‑2 time.

Voluntary Plan Disability Insurance (VPDI): equivalency, approval, and employee rights

Some employers replace the state SDI with an EDD‑approved Voluntary Plan (VPDI). A VPDI must be at least equivalent to SDI in coverage, benefits, and employee cost. It cannot leave employees worse off or charge higher contributions.

Employers must submit a plan to EDD for approval, post a security deposit/bond, and maintain administration. They must allow employees to switch to the State Plan at certain times without losing coverage (see EDD Voluntary Plans).

Consider VPDI if you want to integrate disability and family leave with broader benefits. Examples include coordinated intake, enhanced wage replacement, or predictable costs.

Expect an approval process, ongoing audit/compliance obligations, and fiduciary responsibilities. Companies with small headcounts or high turnover often find the state plan simpler to administer.

Tip: If your paystub shows “VPDI,” your contributions are treated like SDI for California refunds and federal Schedule A deductions.

Claiming SDI and PFL benefits: eligibility, timelines, and documentation

You claim SDI benefits directly with EDD after a qualifying event. Benefits are based on earnings in a “base period” prior to the claim start date and are paid weekly up to a cap.

DI covers wage loss from a non‑work‑related illness, injury, or pregnancy. PFL covers bonding or caregiving.

Claims require a medical certification (for DI) or care/bonding documentation (for PFL). You typically file online; start at California SDI.

File promptly—timelines and waiting‑period rules affect eligibility and the start of payments. Your employer can coordinate PTO but cannot require you to exhaust PTO before filing with EDD.

Keep copies of certifications and all EDD correspondence. Benefit determinations are subject to verification and appeal.

Tip: If you anticipate a leave, confirm your base‑period wages in advance. This helps you understand your weekly benefit estimate.

Coordination with PTO, short‑term disability, workers’ compensation, and SSDI

SDI/PFL can coordinate with employer PTO and short‑term disability (STD). Many employers allow you to use PTO to “top off” SDI to full pay.

STD policies often offset by SDI benefits to avoid overpayments. Workers’ compensation covers on‑the‑job injuries, while DI is for non‑work conditions.

Overlapping periods are uncommon and may reduce SDI. Social Security Disability Insurance (SSDI) is a federal long‑term program with different medical criteria. DI frequently bridges the gap while you evaluate SSDI eligibility.

Check your handbook and STD policy for offsets and sequencing. This helps you avoid pay gaps.

Paystub and W‑2 decoding: Box 14 codes and California return reporting

On your paystub, look for labels like CASDI, CA SDI, SDI, or VPDI to identify the deduction. The year‑to‑date total helps you track any progress toward a wage‑cap stop in capped years.

On your Form W‑2, CASDI/VPDI appears in Box 14 with nonstandard labels (CASDI, CA SDI, SDI, VPDI). Because Box 14 is informational, some tax software doesn’t auto‑pull it into the state return. You may need to enter it to compute any excess SDI credit.

For your California Form 540, report excess SDI (or VPDI) as a refundable credit according to that year’s instructions in the FTB Form 540 instructions. Keep each W‑2 and ensure Box 14 totals align with your final paystub YTD.

Mergers or payroll provider changes can split W‑2s for the same employer. Capture all Box 14 entries.

Tip: If your employer used a voluntary plan, include VPDI amounts the same way. Use them when determining any excess above the annual maximum in capped years.

Annual updates and historical CASDI rates and wage bases

EDD updates the SDI withholding rate—and whether a taxable wage limit applies—on a calendar‑year basis. Historically, the SDI rate has moved within a narrow band, and the taxable wage limit (when applicable) has adjusted periodically.

Lawmakers can also change benefit formulas that affect funding needs. Because these levers drive the maximum annual employee withholding, build a December checkpoint to update payroll settings and employee communications (see EDD Payroll Tax Rates).

Use prior‑year figures only as examples, not assumptions. A small rate change or the presence/absence of a wage cap can materially affect withholdings, cap timing, and any excess credit calculations.

Payroll should validate settings before the first January payroll. Test stop/start cap logic across regular and supplemental runs.

Employees with equity or bonus events early in the year should expect faster cap attainment in capped years. In uncapped years, expect continuous withholding.

Where to find official rate and wage base updates

EDD publishes the official SDI rate and any taxable wage limit in its annual payroll tax materials and employer notices. New values take effect January 1.

Bookmark the EDD Payroll Tax Rates page and the main California SDI portal for benefit and contribution updates.

For refund planning and the precise maximum SDI/VPDI credit amount on your California return, consult the current FTB Form 540 instructions.

If you’re setting up payroll for a new California remote worker, confirm registration and sourcing requirements at EDD guidance for out‑of‑state employers. For self‑employed coverage options, see Disability Insurance Elective Coverage (DIEC).

Finally, if considering a private plan alternative, review approval and equivalency rules at EDD Voluntary Plans.