Overview

The Ca Sdi Tax is California’s employee payroll deduction that funds State Disability Insurance (DI) and Paid Family Leave (PFL). This article explains how SDI appears on paychecks and W‑2s, what changed for 2024–2025, and the employer and employee steps to withhold, remit, and reconcile SDI.

Throughout the guide you’ll find links to authoritative sources—EDD pages for program rules and rates, FTB guidance on refunds, and IRS instructions for W‑2 and Schedule A—so you can confirm specific details with the official agencies.

What is the CA SDI tax, and what does it fund?

SDI is an employee-paid payroll deduction that funds California’s State Disability Insurance and Paid Family Leave programs. These programs provide partial wage replacement when an employee cannot work due to a nonwork disability or takes leave to care for a seriously ill family member or to bond with a new child (see the EDD State Disability Insurance overview).

The state-administered DI and PFL programs differ from federal Social Security Disability Insurance (SSDI), which is administered by the Social Security Administration and funded through federal payroll taxes.

Why does CA SDI appear on my paycheck, and who pays it?

SDI appears on paychecks because employees fund the program and employers are required to withhold and remit the deduction to the Employment Development Department (EDD). Employers must register, withhold the correct amount, make deposits, and file payroll returns per EDD procedures (see the California Employer’s Guide (DE 44) and e‑Services for Business).

Employers are responsible for identifying which wages are subject to SDI and for using the EDD filing and deposit schedules; employees do not remit SDI directly except in elective or self‑employed coverage arrangements.

What is the 2025 CA SDI rate, wage base, and maximum withholding?

The SDI rate is published annually by the EDD; confirm the official 2025 percent on EDD’s Rates and Withholding page before processing payroll. Importantly, beginning January 1, 2024, California removed the SDI taxable wage limit, so SDI applies to all subject wages with no annual wage cap (see DE 44 and EDD’s rates page for the 2024 change).

In practical terms, with no wage cap the SDI deduction for a pay period is the subject wages multiplied by the published 2025 rate; there is no year‑to‑date ceiling where deductions stop.

How does CA SDI show up on a pay stub and W‑2?

On pay stubs SDI commonly appears as “CASDI,” “SDI,” or—if the employer has an EDD‑approved voluntary plan—as “VPDI.” The pay stub typically shows both current‑period and year‑to‑date amounts. For federal reporting, SDI amounts are usually entered in Box 14 of Form W‑2 as an informational entry; see the IRS Instructions for Forms W‑2 and W‑3 for Box 14 guidance.

Because Box 14 is informational rather than standardized, employers should label SDI consistently so employees and payroll software can identify the contribution.

Can employers or employees opt out, and what are voluntary plans?

Employers cannot unilaterally opt employees out of SDI unless the employer obtains EDD approval for a voluntary plan that provides equal or better benefits at no greater cost to employees. A state‑approved voluntary plan replaces the SDI program for that employer’s covered employees (see EDD’s voluntary plan guidance).

Voluntary plans require EDD approval, employee consent, and ongoing compliance; employers that operate a voluntary plan handle claims administration and must maintain benefit parity with the state program.

What is a voluntary plan and when is it approved?

A voluntary plan is an employer-sponsored disability and family leave plan that substitutes for the state SDI program for that employer’s workforce. EDD approves a plan only if it provides benefits at least equal to the state plan, employee costs are no higher, a majority of affected employees consent where required, and adequate security (for example, a bond) is provided.

Once approved, the employer is responsible for administering claims and maintaining records consistent with EDD requirements; see EDD’s voluntary plan pages for the full approval criteria and process.

Who can choose Disability Insurance Elective Coverage (DIEC)?

Self‑employed Californians—such as independent contractors, sole proprietors, officers of closely held corporations, and certain LLC members—may opt into SDI by enrolling in Disability Insurance Elective Coverage (DIEC). Enrollment, premium calculations, and payments are handled through EDD processes so eligible self‑employed workers can access DI and PFL benefits similar to employees.

How does Nonindustrial Disability Insurance (NDI) cover state employees?

Nonindustrial Disability Insurance (NDI) is a separate wage‑replacement program that covers eligible California state employees; it is governed by CalHR and collective bargaining agreements rather than the EDD state SDI program. NDI rules, eligibility, waiting periods, and benefit levels are set by state human resources and bargaining terms—consult CalHR materials and your department’s payroll office for specifics.

Is CA SDI tax mandatory, and who is exempt?

SDI is mandatory on California “subject wages” unless an EDD‑approved voluntary plan applies or a specific statutory exemption applies. Common exemptions include certain family employment, specific student or nonprofit roles, and services performed entirely outside California; EDD’s Types of Employment (DE 231 series) explains which roles are subject or excluded.

When employees work across states, apply EDD’s localization and direction‑and‑control tests to determine whether wages are subject to California SDI, and document the basis for the determination in the employee’s file.

How do you calculate CA SDI withholding on a paycheck in 2025?

Calculate SDI by multiplying the employee’s subject wages for the pay period by the published 2025 SDI rate from EDD. Because there is no wage cap, apply the rate to all subject wages including regular pay and supplemental wages like bonuses and commissions.

Before each payroll run confirm the current year’s SDI rate on the EDD Rates and Withholding page and configure your payroll system accordingly so SDI computes automatically.

Most payroll systems compute SDI automatically once subject wages and the current rate are set; treat supplemental payments the same way as regular wages for SDI purposes.

What steps should employers follow to set up and remit CA SDI correctly?

Employers should register with EDD, configure payroll to withhold the current SDI rate, deposit withheld amounts on the assigned schedule, and file required returns through EDD’s e‑Services for Business. Follow EDD guidance to map earnings codes and reconcile totals.

These steps are described in the EDD California Employer’s Guide (DE 44) and implemented via EDD’s e‑Services for Business.

What forms and systems manage CA SDI compliance?

Employers use EDD’s e‑Services for Business to register, deposit, and file quarterly returns DE 9 and DE 9C; e‑Services also supports amended or adjusted returns when corrections are needed. Keeping payroll SDI totals accurate helps align employer records with employee benefit claims filed through EDD’s SDI Online portal.

Accurate mapping of earnings, consistent labeling of deductions, and routine reconciliation reduce claim and W‑2 mismatches that can delay employee benefits or require corrections.

How is CA SDI treated on tax returns, deductibility, and refunds?

Employee SDI contributions are typically reported on Form W‑2 (Box 14) and may be treated as state tax payments for itemized deductions on federal Schedule A subject to federal limits; see the IRS Schedule A instructions. For California income tax handling and potential refunds for excess CA SDI withheld, consult the Franchise Tax Board’s Form 540 instructions and guidance on “Excess California SDI (or VPDI) Withheld.”

Because the SDI wage cap was removed starting in 2024, excess‑withholding credits due solely to high wages across multiple employers are now less common; many refund situations arise from jurisdiction or classification errors rather than wage caps.

How can you verify and reconcile CA SDI deductions throughout the year?

Reconcile SDI each quarter by comparing payroll registers, deposit history in e‑Services, and DE 9/DE 9C filings to catch variances before year‑end. Regular spot checks of pay stubs and system rate settings help prevent systemic under- or over‑withholding.

If errors are discovered after filing, use e‑Services to amend DE 9/DE 9C and correct deposits; document adjustments and employee communications to maintain an audit trail.

What are common CA SDI mistakes and how do you avoid them?

Typical errors include using an outdated SDI rate, mistakenly applying a wage cap, and failing to update employee localization or voluntary plan labels. A few preventive controls and routine reconciliations reduce the risk of corrections and amended returns.

Documented procedures for rate updates, earnings‑code mapping, and quarterly reconciliation help prevent and resolve the mistakes above.

What should employees do if too much SDI was withheld?

If you suspect over‑withholding, first confirm the SDI rate and whether your wages were subject to California SDI; then ask your employer to correct payroll records and, if necessary, issue a corrected W‑2 (W‑2c). If the employer cannot correct the error, follow FTB guidance for claiming a refundable credit for excess SDI withheld.

Because the SDI wage cap was removed starting in 2024, many historic reasons for “excess SDI” no longer apply; most over‑withholding cases now stem from classification or jurisdiction errors.

Where should you go for official guidance and the latest rates?

Use EDD’s official pages for program rules, rates, and filing systems: the State Disability Insurance overview, the Rates and Withholding page for the current SDI rate, the California Employer’s Guide (DE 44), e‑Services for Business for registrations and deposits, and the Types of Employment (DE 231 series) for coverage tests. For tax reporting and refund procedures consult the IRS Instructions for Forms W‑2 and W‑3, the IRS Schedule A instructions, and the FTB Form 540 instructions. For benefit taxation and Form 1099‑G reporting details, see EDD’s DI and PFL Benefit Payments and Taxes page.