The SDI deduction on your paycheck is a mandatory contribution to your state’s State Disability Insurance program, which funds short-term disability benefits and, in most of these states, paid family leave. Only five states require it: California, Hawaii, New Jersey, New York, and Rhode Island. In exchange for the deduction, you can claim partial wage replacement if a non-work illness, injury, or pregnancy keeps you off the job, or if you need time off to bond with a new child or care for a seriously ill family member.
Why You’re Seeing It (And Why Some People Don’t)
If your paycheck comes from a job in one of the five mandatory states, the deduction is automatic. Nothing you did triggered it, and you can’t opt out as an employee of a covered employer. The programs go by different names depending on where you work: California calls it State Disability Insurance (SDI); New Jersey, Rhode Island, and Hawaii use Temporary Disability Insurance (TDI); and New York labels its program Disability Benefits (DB), with a separate Paid Family Leave line alongside it.1Justia. Short-Term Disability Benefits Under State Laws
In California and Rhode Island, the deduction comes entirely out of worker paychecks. In Hawaii, New Jersey, and New York, employers also contribute, but the employee share still shows up on your stub.2Department of Labor, Office of Unemployment Insurance. Temporary Disability Insurance
How Much Is Being Taken Out
The math is straightforward: your gross wages for the pay period multiplied by your state’s contribution rate, usually up to an annual wage cap. Once your year-to-date earnings hit that cap, the deduction stops until January. Rates for 2026 vary considerably.
California
The 2026 rate is 1.3% of all wages, with no taxable wage cap.3Employment Development Department. Contribution Rates, Withholding Schedules, and Meals and Lodging Values The cap was eliminated starting in 2024 under Senate Bill 951, so high earners now pay significantly more than before. Someone earning $150,000 contributes $1,950 for the year; someone earning $400,000 contributes $5,200.
New Jersey
You’ll actually see two line items. Temporary Disability Insurance runs 0.19% and Family Leave Insurance runs 0.23%, both applied to the first $171,100 in wages.4Department of Labor and Workforce Development. NJ Department of Labor and Workforce Development Announces New Benefit Rates for 2026 Combined, that’s 0.42%, with a maximum annual employee contribution of roughly $719.
Rhode Island
The 2026 TDI rate is 1.1% on the first $100,000 in wages, for a maximum annual contribution of $1,100.5Rhode Island Department of Labor and Training. 2026 Tax Rates for Unemployment Insurance and Temporary Disability Insurance
Hawaii
Employers can withhold up to 0.5% of weekly wages, but the weekly deduction is capped at $7.50 (about $390 per year).6Hawaii Department of Labor and Industrial Relations. 2026 Maximum Weekly Wage Base and Maximum Weekly Benefit Employers must cover at least half the plan’s total cost.
New York
Two separate deductions. The disability benefits contribution is capped at $0.60 per week, or about $31 per year. The Paid Family Leave contribution for 2026 is 0.432% of gross wages, with a maximum annual contribution of $411.91.7Workers’ Compensation Board. Employee Disability Benefits
What the Money Pays For
Your contributions fund two related benefits: disability insurance for your own medical conditions, and paid family leave for caregiving and bonding.
Disability Insurance replaces part of your wages when you can’t work because of a non-work-related illness, injury, or pregnancy. The “non-work-related” piece matters. On-the-job injuries fall under workers’ compensation, a separate system funded by employers. SDI covers things like surgery recovery, a complicated pregnancy, a serious illness, or a mental health condition that keeps you from doing your job.
Paid Family Leave covers time off to bond with a new child (by birth, adoption, or foster placement) or to care for a seriously ill family member such as a spouse, parent, or child.8Employment Development Department. Paid Family Leave Benefits and Payments FAQs Some states also extend PFL to military family needs.
How Much You’d Actually Get Paid
If you file a claim, your benefit is a percentage of your average weekly wage, subject to a cap. The percentage and the cap differ widely.
California replaces 70% to 90% of wages, with lower earners getting the higher percentage, up to $1,765 per week for 2026.9Employment Development Department. Contribution Rates and Benefit Amounts DI benefits can last up to 52 weeks; PFL is capped at eight weeks within any 12-month period.10Employment Development Department. Disability Insurance Benefit Payment Amounts
New York sits at the other end. Disability benefits replace 50% of your average weekly wage, capped at just $170 per week, for up to 26 weeks. Combined disability and paid family leave in New York cannot exceed 26 weeks in any 52-week period.7Workers’ Compensation Board. Employee Disability Benefits
New Jersey, Rhode Island, and Hawaii fall between those extremes. Your actual benefit depends on earnings in a “base period,” usually the 12 months ending roughly five to seven months before your claim. Each state’s labor department publishes a calculator.
Qualifying and Filing in Time
Eligibility rules share a common shape across the five states:
- You need minimum earnings during a base period before the claim. New hires may not have enough history to qualify.
- A licensed healthcare provider must certify the medical condition, whether it’s yours (for DI) or your family member’s (for PFL caregiving).
- Most states impose an unpaid waiting period. California requires seven consecutive days of disability before benefits are payable, and that week itself is unpaid.11Legal Information Institute. California Code of Regulations Title 22 2627(b)-1 – Waiting Period
- You must have been employed or actively looking for work when the disability or need for leave began.
Filing deadlines are strict and this is where people lose benefits. In New York, you must file your disability claim within 30 days of becoming disabled.7Workers’ Compensation Board. Employee Disability Benefits In California, PFL claims must be filed no later than 41 days after your family leave begins.12Employment Development Department. Paid Family Leave Claim Process “I didn’t know about the deadline” rarely succeeds on appeal. Check your state’s rules as soon as you know you’ll need to file.
SDI Does Not Protect Your Job
This surprises people more than anything else. Collecting SDI does not require your employer to hold your position open. SDI is strictly wage replacement.13Employment Development Department. Family and Medical Leave Act and California Family Rights Act FAQs
Job protection comes from separate laws. The federal Family and Medical Leave Act gives eligible employees up to 12 weeks of unpaid, job-protected leave per year, meaning your employer must restore you to the same or an equivalent position when you come back.14U.S. Department of Labor. Employment Laws: Medical and Disability-Related Leave FMLA applies only to employers with 50 or more employees, and you must have worked there at least 12 months. Several states have their own family leave statutes with broader coverage.
In practice, SDI and FMLA often run together: SDI pays part of your wages while FMLA keeps your job intact. If you don’t qualify for FMLA because your employer is too small or you haven’t been there long enough, collecting SDI alone won’t stop your employer from filling your role. Confirm your FMLA status with HR before an extended leave.
Are SDI Benefits Taxable?
The answer depends on which benefit you received and which state you’re in. In California, regular DI benefits are generally not taxable at the federal or state level. The exception is DI paid as a substitute for unemployment: if you were collecting unemployment and became disabled, those DI payments are federally taxable.15Employment Development Department. Tax Information (Form 1099G)
PFL follows different rules. California PFL benefits are taxable on your federal return but not on your California state return, and the state sends you a Form 1099-G reporting the amount.16Internal Revenue Service. Instructions for Form 1099-G (03/2024) New York PFL benefits are also subject to federal income tax. Consider having taxes withheld from your benefit payments if you want to avoid a bill in April.
Refund If Two Employers Over-Withheld
In a state with a wage cap, if you worked for two or more employers in the same year, each one withholds SDI independently. Neither knows what the other took out, so your combined contributions can exceed the annual maximum. You’re entitled to a refund of the excess.
California had this problem until 2024, when it eliminated its taxable wage cap, so the multiple-employer overpayment issue no longer applies there. It’s still relevant in New Jersey and Rhode Island, where you’d claim the excess through your state tax return.17Employment Development Department. Claim for Refund of Excess California State Disability Insurance Deductions (DE 1964) If a single employer withheld too much on its own because of a payroll error, contact that employer directly for reimbursement rather than claiming it on your tax return.
Self-Employed Workers and Voluntary Plans
Self-employed workers and independent contractors generally aren’t covered because no one is withholding on their behalf. California offers Disability Insurance Elective Coverage, which lets sole proprietors and independent contractors opt in voluntarily. You need a net profit of at least $4,600 per year, there’s a six-month waiting period after enrollment before you can file a claim, and you must commit to at least two full calendar years of participation.18Employment Development Department. Disability Insurance Elective Coverage (DIEC) Self-employed workers in the other four states should check with their state labor department about similar opt-in options.
On the employer side, California, New Jersey, New York, and Hawaii allow companies to replace the state program with a Voluntary Plan through a private insurer, provided the plan meets or exceeds state standards.19Employment Development Department. Voluntary Plan If your employer uses one, the deduction still appears on your paycheck, but it funds the private plan rather than the state fund. Your benefits remain at least as generous as what the state would pay.