SDI tax, short for State Disability Insurance tax, is a payroll deduction collected in six U.S. jurisdictions that funds short-term wage replacement when a non-work-related illness, injury, pregnancy, or similar medical condition keeps you from working. It’s separate from Workers’ Compensation, which covers on-the-job injuries. Whether you see this line item on your pay stub depends entirely on where you work.
Where You’ll See SDI on Your Paycheck
Six jurisdictions require SDI contributions: California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico. The label on your pay stub changes with the state. California marks it “CASDI,” New Jersey uses “TDB” or “NJ TDF,” and Rhode Island calls it “TDI.” Every other state either has no equivalent program or has moved toward a broader paid family and medical leave model instead.
If you work outside those six places and still see an unfamiliar deduction with “disability” or “family leave” in the name, it’s probably a paid family and medical leave (PFML) contribution rather than traditional SDI. More on that at the end.
2026 SDI Rates and Wage Caps
The cost of SDI ranges from trivial to substantial depending on the state. California charges the highest percentage and removed its wage cap starting in 2024, so every dollar of earnings is subject to withholding. New York, at the other end, costs most workers less than the price of a coffee per year.
- California: 1.3% of all wages, no annual cap.1Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values
- Rhode Island: 1.1% on the first $100,000 in wages, capping the annual contribution at $1,100.2Rhode Island Department of Labor and Training. 2026 Tax Rates for Unemployment Insurance and Temporary Disability Insurance
- New Jersey: 0.19% on the first $171,100 in wages, capping the annual deduction at roughly $325.
- Hawaii: Up to 0.5% of weekly wages, with maximum withholding of $7.50 per week, or about $390 a year.3Hawaii Department of Labor and Industrial Relations. 2026 Maximum Weekly Wage Base and Maximum Weekly Benefit
- New York: 0.5% of weekly wages up to a $120 weekly base, capped at $0.60 per week, or roughly $31 a year.
- Puerto Rico: 0.3% on the first $9,000 in wages, capping the employee’s annual cost at $27. The employer pays a matching 0.3%.
The spread is striking. A California worker earning $200,000 pays $2,600 a year in SDI tax. A New York worker at the same salary pays about $31. Those differences track directly to the size of the benefit each program pays out.
What You Get in Return
SDI benefits replace part of your income when a medical condition prevents you from doing your regular job. Qualifying situations include recovery from surgery, a serious illness, a mental health condition that keeps you from working, and pregnancy or childbirth. The disability has to be non-work-related; anything you were hurt doing on the job falls under Workers’ Compensation.4Employment Development Department. Am I Eligible for Disability Insurance Benefits?
Most SDI programs replace between 60% and 70% of your average weekly wages, but the weekly maximum varies enormously. New Jersey caps its weekly benefit at $1,119 in 2026.5New Jersey Department of Labor & Workforce Development. New Benefit Rates for 2026 New York’s disability program, funded by those small premiums, pays a maximum of around $170 per week. You generally get what you pay for.
Duration also depends on the state. California allows up to 52 weeks of disability payments per claim.6Employment Development Department. Disability Insurance Benefit Payment Amounts Most other states cap benefits at 26 weeks. These are short-term programs by design, meant to bridge the gap until you return to work rather than replace long-term disability insurance.
Every program imposes an unpaid waiting period before benefits start. In California, you serve seven consecutive calendar days of disability before your first payable day.7Legal Information Institute. California Code of Regulations Title 22 2627(b)-1 – Waiting Period Most other SDI states use a similar one-week waiting period, so the first check doesn’t arrive until at least the second week of your disability.
Some states fold Paid Family Leave (PFL) into the same tax and benefit structure. In California, the 1.3% SDI withholding funds both disability insurance and PFL, which covers time off to bond with a new child or care for a seriously ill family member. New York and New Jersey run their paid family leave programs as separate payroll deductions alongside the SDI contribution.
Qualifying for benefits requires a minimum amount of prior earnings with SDI taken from your pay. In California, the threshold is $300 in wages during your base period, which covers roughly 5 to 18 months before your claim starts.8Employment Development Department. Disability Insurance – Eligibility FAQs Other states set their own thresholds, but the concept is the same: you have to pay in before you can draw out.
Are SDI Benefits Themselves Taxed?
The tax treatment of benefit payments depends on the state and the level of government doing the taxing. The IRS treats payments from a state sickness or disability fund as includable income, so SDI benefits are generally subject to federal income tax.9Internal Revenue Service. Publication 525 (2025), Taxable and Nontaxable Income There are meaningful exceptions.
Rhode Island’s TDI benefits are not subject to either federal or state income tax. California’s disability benefits are generally not subject to state income tax, though they may be taxable federally. New Jersey’s temporary disability benefits are federally taxable but exempt from state income tax. Hawaii’s rules depend on how the premiums were funded: benefits tied to employer-paid or pre-tax employee premiums are taxable, while benefits funded entirely through after-tax employee contributions are not.
Because the treatment varies, check whether your state’s program withholds taxes from benefit payments or leaves you to owe at tax time. Some states don’t withhold automatically, which can leave you with an unexpected bill in April. If your benefits will run more than a few weeks, consider asking the state agency to withhold federal taxes or setting aside money to cover the liability.
Filing a Claim
The mechanics vary by state, but the pattern is consistent. You submit a claim, your doctor certifies the disability, and the state agency reviews eligibility. Using California as an example:
- Submit your claim online or by mail. In California, online filing through SDI Online is faster.10Employment Development Department. Disability Insurance Claim Process
- Get medical certification from your doctor or other licensed health professional. In California, this must happen within 49 days of when the disability begins, or you risk losing benefits. The certification needs a specific diagnosis, an estimated recovery date, and the provider’s signature.11Employment Development Department. Certify or Extend Claims – Basics for Physicians/Practitioners
- Wait for a determination, which takes roughly 14 days once the state has your completed claim.
- Serve the unpaid waiting period of seven calendar days. Your first payment covers the eighth day forward.
The most common reason claims stall is incomplete medical certification. Providers who write “unknown” or “indefinite” as the recovery date, or who leave diagnosis codes blank, trigger delays. Follow up with your doctor to make sure every field is filled in.
If You’re Self-Employed
SDI is not automatically deducted from self-employment or independent contractor income, since there’s no employer running payroll. You can opt in voluntarily in states that offer elective programs. California’s Disability Insurance Elective Coverage program lets sole proprietors and independent contractors apply for coverage that gives them access to both disability insurance and paid family leave benefits.12Employment Development Department. Disability Insurance Elective Coverage (DIEC) You apply in writing to the state agency and pay premiums on a set schedule. Premiums for elective SDI coverage are typically far less than comparable private disability policies.
If Your State Isn’t on the List
More than a dozen states have launched or are launching paid family and medical leave programs that serve a similar purpose to SDI. Connecticut, Colorado, Delaware, Massachusetts, Oregon, and Washington already collect PFML payroll taxes, and Minnesota began contributions in January 2026. These programs typically cover both your own medical leave and caregiving leave under a single payroll tax, funded through small employee contributions, employer contributions, or both. The benefits and eligibility rules aren’t identical to SDI, but if you see a new “family leave” or “medical leave” deduction on your pay stub in one of these states, that’s what it is.