California State Disability Insurance Tax, commonly called California SDI tax, is an employee payroll withholding that helps fund California's Disability Insurance and Paid Family Leave programs.
For 2026, the California SDI withholding rate is 1.3%. There is no taxable wage ceiling, which means all wages subject to SDI are generally included when calculating the employee's contribution.
California removed the SDI taxable wage limit beginning January 1, 2024.
Unlike California Unemployment Insurance and Employment Training Tax, SDI is not normally an employer-funded payroll tax.
Employers are responsible for calculating the deduction, withholding it from covered employees' wages, reporting it correctly, and sending the withheld amount to the California Employment Development Department, or EDD.
What Is California State Disability Insurance Tax?
California State Disability Insurance is a payroll-funded program that provides short-term wage replacement benefits to eligible workers.
The program includes two main benefit components:
Disability Insurance, or DI, which may provide benefits when an eligible worker cannot work because of a non-work-related illness, injury, pregnancy, childbirth, surgery, or another qualifying medical condition.
Paid Family Leave, or PFL, which may provide benefits when an eligible employee needs time away from work to care for a seriously ill family member, bond with a new child, or participate in certain qualifying events connected with a family member's military deployment.
Both programs are funded through California SDI contributions withheld from employees' wages.
For payroll teams, this makes SDI primarily a withholding and remittance responsibility rather than an employer contribution expense.
Who Must Pay California State Disability Insurance Tax?
California SDI is generally paid by covered employees through payroll deductions.
The employer does not normally pay the standard SDI contribution from its own funds. Instead, the employer must calculate and withhold the applicable SDI amount from the employee's subject wages and send those funds to the EDD.
Employers therefore still have significant responsibilities even though the tax is employee-funded.
They must determine which wages are subject to SDI, calculate the correct deduction, include the amounts in required California payroll reporting, deposit withheld SDI on the correct schedule, and maintain accurate payroll records.
Who Is Subject to California SDI Tax?
California wages are generally subject to SDI unless the worker or type of employment falls under a specific exclusion, approved exemption, elective coverage arrangement, or EDD-approved Voluntary Plan.
California defines wages broadly as compensation paid for an employee's personal services. This can include cash, checks, electronic payments and, depending on the circumstances, the cash value of certain noncash compensation.
Employee classification is important. Employers should not assume that part-time, temporary or casual workers are outside California SDI solely because of their work schedule.
Independent contractors and self-employed individuals generally do not have standard SDI withholding taken from payroll because they are not employees.
However, qualifying self-employed people and independent contractors may apply for Disability Insurance Elective Coverage, or DIEC.
California SDI Tax Rate for 2026
The California SDI withholding rate for 2026 is:
1.3%
The EDD calculates the SDI rate annually under California law. The 2026 rate applies to employees subject to California SDI withholding.
| 2026 California SDI Item | Amount |
|---|---|
| SDI withholding rate | 1.3% |
| Taxable wage ceiling | None |
| Maximum annual SDI contribution | No fixed maximum |
| Paid by | Employee |
| Withheld and remitted by | Employer |
| Programs funded | Disability Insurance and Paid Family Leave |
Because California no longer has an SDI wage ceiling, there is no fixed maximum annual SDI withholding amount for a covered employee.
California SDI Taxable Wage Base and Wage Limit for 2026
California has no SDI taxable wage limit in 2026.
Effective January 1, 2024, California removed both the SDI taxable wage ceiling and the associated maximum employee contribution. As a result, all wages that are subject to SDI remain subject to the 1.3% withholding rate regardless of how much the employee earns during the year.
This is different from California UI and ETT, which continue to use a $7,000 annual taxable wage limit.
For example, an employee earning $50,000 and an employee earning $500,000 do not stop paying SDI after reaching a wage threshold. Assuming all wages are subject to SDI, the 1.3% withholding applies throughout the year.
California SDI: Employer vs. Employee Contribution
California SDI is primarily an employee-paid payroll tax.
The employee bears the cost through payroll withholding, while the employer handles the calculation, deduction, reporting and payment to the EDD.
| California Payroll Tax | Who Normally Pays? |
|---|---|
| Unemployment Insurance | Employer |
| Employment Training Tax | Employer |
| State Disability Insurance | Employee |
| Personal Income Tax | Employee |
Employers should therefore record SDI as an employee withholding liability rather than an employer payroll tax expense, unless a special employer arrangement applies.
How to Calculate California State Disability Insurance Tax
California SDI withholding is calculated by multiplying the employee's SDI-taxable wages by the current SDI rate.
For 2026, the rate is 1.3%. Because there is no annual wage ceiling, payroll systems should continue applying SDI withholding to all subject wages throughout the year.
California SDI Calculation Formula
California SDI Withholding = SDI-Taxable Wages × 1.3%
In decimal form:
SDI Withholding = Taxable Wages × 0.013
There is no annual maximum to apply for standard SDI withholding in 2026.
Practical California SDI Payroll Calculation Example
Assume an employee earns $6,000 per month in wages fully subject to California SDI.
The monthly calculation is:
$6,000 × 1.3% = $78
The employer should withhold $78 in California SDI from that month's wages.
If the employee earns $6,000 every month for the full year:
Annual wages: $72,000
$72,000 × 1.3% = $936
The employee's total California SDI contribution for the year would be $936, assuming all wages remain subject to SDI.
The same method continues to apply to higher wages because California does not impose an SDI taxable wage ceiling.
For example, an employee earning $180,000 in 2026 would have:
$180,000 × 1.3% = $2,340
in SDI withholding. This matches the calculation method used in the EDD's own 2026 example.
Is There a California SDI New Employer Rate?
No separate new employer SDI rate applies.
Unlike California Unemployment Insurance, where new employers are generally assigned a specific introductory UI rate, the California SDI withholding rate is the same statewide rate for employees subject to SDI.
For 2026, that rate is 1.3%.
An employer's age, claims history or UI reserve account does not determine its standard SDI withholding rate.
California Employer Registration Requirements
Employers generally must register with the California EDD within 15 days after hiring employees and paying more than $100 in wages during a calendar quarter.
Registration is typically completed through e-Services for Business.
Once registered, the business receives an EDD employer payroll tax account number used for California employment tax filings, wage reports and payroll tax deposits.
Household employers have different registration thresholds and should follow the EDD's household-employer rules.
Required California SDI Payroll Forms
Employers handling California SDI commonly use the following payroll forms:
| Form | Payroll Purpose |
|---|---|
| DE 9 | Quarterly Contribution Return and Report of Wages |
| DE 9C | Quarterly employee wage and withholding reporting |
| DE 88 | Payroll Tax Deposit for SDI, PIT, UI and ETT payments |
| DE 1857A | Required workplace notice covering UI, DI and Paid Family Leave |
| DE 5067 | Religious Exemption Certificate, where applicable |
| DE 2520BV | Application for approval of an employer Voluntary Plan |
The DE 88 is used to report and pay California payroll tax deposits, including SDI withholding. Employers can make these deposits electronically through e-Services for Business.
Employers must also provide and post required information about California Disability Insurance and Paid Family Leave programs.
California SDI Filing Requirements
California employers generally report wages and payroll withholding each quarter using DE 9 and DE 9C.
The DE 9 provides quarterly payroll tax information, while the DE 9C provides employee-level wage and withholding details.
Employers are generally required to electronically file California employment tax returns, wage reports and payroll tax deposits. The EDD's e-Services for Business platform can be used for these filings and payments.
Employers should distinguish between quarterly reporting and deposit frequency. SDI may need to be deposited more frequently than quarterly even though the wage reports themselves are quarterly.
California SDI Filing and Payment Frequency
The frequency for depositing California SDI and PIT withholding depends on the employer's federal payroll tax deposit schedule and the amount of California PIT accumulated.
California uses quarterly, monthly, semiweekly and next-day deposit schedules.
| Federal Deposit Situation | California PIT Level | SDI and PIT Deposit Schedule |
|---|---|---|
| Next-day or semiweekly | Under $350 | Quarterly |
| Next-day or semiweekly | $350 to $400 | Monthly |
| Next-day | More than $400 | Next business day |
| Semiweekly | More than $400 | Semiweekly |
| Monthly, quarterly or annual | Under $350 | Quarterly |
| Monthly, quarterly or annual | $350 or more | Monthly |
For semiweekly depositors with more than $400 in accumulated California PIT, deposits for Wednesday, Thursday and Friday paydays are generally due the following Wednesday. Deposits for Saturday through Tuesday paydays are generally due the following Friday.
This means an employer should not assume that SDI is always paid quarterly.
Important California SDI Due Dates for 2026
Quarterly DE 9 and DE 9C reporting follows this 2026 schedule:
| Reporting Period | Filing Due Date | Delinquent If Not Filed By |
|---|---|---|
| Q1: January to March | April 1, 2026 | April 30, 2026 |
| Q2: April to June | July 1, 2026 | July 31, 2026 |
| Q3: July to September | October 1, 2026 | November 2, 2026 |
| Q4: October to December | January 1, 2027 | February 1, 2027 |
If a due date falls on a Saturday, Sunday or legal holiday, the next business day generally becomes the timely filing date.
Monthly DE 88 deposits are generally due on the 15th of the following month, subject to weekend and holiday adjustments. Semiweekly and next-day depositors must follow the applicable accelerated schedule.
California SDI Exemptions and Special Rules
California SDI applies broadly, but several important special rules exist.
EDD-Approved Voluntary Plans
An employer may offer an EDD-approved Voluntary Plan, or VP, instead of standard State Disability Insurance.
A Voluntary Plan must provide all benefits available under SDI and at least one benefit that is better. It also cannot cost employees more than SDI. A majority of eligible employees must approve the plan, and the employer must obtain EDD approval before offering it.
Employers with approved VP coverage do not send regular SDI contributions to the EDD for employees covered by that plan.
Contributions for participating employees must instead be handled under the approved plan rules. Employees who remain covered by state SDI still require normal SDI remittance.
Religious Exemption
Certain workers who follow the teachings of a qualifying religious sect, denomination or organization that relies solely on prayer for healing may apply for a religious exemption using Form DE 5067.
If the EDD approves the exemption, the worker will not be eligible for SDI benefits.
Public Entity Employees
Some public entity employees are not automatically covered by SDI. Coverage may apply when the employer or bargaining unit elects into the program.
Self-Employed Individuals and Independent Contractors
Self-employed individuals and independent contractors who do not normally pay SDI through payroll may be able to obtain Disability Insurance Elective Coverage.
For 2026, DIEC operates under its own premium system and should not be confused with the standard 1.3% employee SDI payroll withholding.
California SDI Rules for Remote and Multistate Employees
An employee's home address alone does not determine whether California SDI withholding applies.
When an employee performs services in California and one or more other states, California applies four multistate employment tests in order:
Localization of services
Base of operations
Place of direction and control
Employee residence
These tests determine whether the employee's services are subject to California UI, ETT and SDI or another state's employment tax system.
An employee must perform at least some services in California before the tests can result in all of the employee's services being allocated to California.
For example, if an employee works primarily in California and only performs temporary or incidental duties in another state, the employment may remain localized in California.
If the services are not localized in any state, the employer moves to the base-of-operations test, followed by direction and control and then employee residence if necessary.
For payroll teams managing remote employees, this means SDI withholding should be determined based on the actual multistate employment facts rather than automatically using the employee's mailing address.
Common California SDI Payroll Mistakes Employers Should Avoid
| Payroll Mistake | Why It Causes Problems |
|---|---|
| Stopping SDI after an employee reaches a wage threshold | California has had no SDI taxable wage ceiling since 2024. |
| Treating SDI as an employer-paid tax | Standard SDI is withheld from employee wages. |
| Using the old 2025 rate | The SDI rate increased from 1.2% in 2025 to 1.3% in 2026. |
| Assuming SDI is always deposited quarterly | Deposit frequency can be monthly, semiweekly or next-day depending on the employer's schedule and PIT withholding. |
| Using a remote employee's address as the only coverage test | California uses multistate employment rules. |
| Continuing state SDI withholding for approved VP employees | Employees properly covered by an approved VP follow separate contribution rules. |
| Misclassifying employees as independent contractors | Misclassification can result in unpaid withholding liabilities. |
| Forgetting to update payroll systems for the January rate change | SDI rates are set annually and payroll settings should be reviewed each year. |
One of the most important 2026 payroll checks is ensuring that the system does not apply an annual SDI wage cap.
California SDI Penalties and Interest for Late Payment
California generally imposes a 15% penalty plus interest on late payroll tax payments, including withheld SDI amounts.
For both halves of 2026, the EDD lists an annual interest rate of 7% on overdue payroll taxes. Interest is compounded daily on unpaid tax, interest and certain penalties.
The EDD resets its overdue-tax interest rate periodically, so employers resolving liabilities from a different period should verify the rate that applies to that specific period.
Employers should also take withholding obligations seriously because withheld payroll taxes are amounts collected from employees and held for remittance to the state.
How PayDay Can Help Manage California State Disability Insurance Tax
California SDI payroll compliance requires employers to apply the current withholding rate to subject wages, handle the absence of a wage ceiling, calculate deductions each payroll period, maintain year-to-date payroll records and prepare information needed for EDD reporting.
PayDay payroll software can help automate payroll calculations and deductions using configured state payroll tax rules. For California payrolls, this can help payroll teams consistently calculate SDI withholding on employee wages and maintain payroll information used for tax-related reporting and compliance workflows.
Because California removed the annual SDI wage ceiling, payroll systems also need to continue applying SDI to subject wages throughout the year rather than automatically stopping the deduction once an employee reaches an outdated threshold.
PayDay can also help organize payroll records, employee deductions and tax-related reporting data, while employers remain responsible for confirming worker coverage, deposit schedules, exemptions and any EDD-approved Voluntary Plan arrangements.
Frequently Asked Questions
What is the California SDI tax rate for 2026?
The California SDI withholding rate for 2026 is 1.3% of wages subject to SDI.
What is the California SDI wage limit for 2026?
There is no California SDI taxable wage limit in 2026. All subject wages are included when calculating SDI withholding. California removed the taxable wage ceiling beginning January 1, 2024.
What is the maximum California SDI tax an employee can pay in 2026?
There is no fixed annual maximum because California no longer has an SDI taxable wage ceiling.
An employee's annual SDI contribution depends on the amount of wages subject to the 1.3% rate.
Does the employer pay California SDI tax?
Standard California SDI is generally paid by the employee through payroll withholding.
The employer's responsibility is to calculate the withholding, deduct it from employee wages, report it and send the funds to the EDD.
Is California Paid Family Leave a separate payroll tax?
No separate standard PFL payroll tax is normally withheld in addition to SDI. California Paid Family Leave benefits are funded through the State Disability Insurance program.
Is there a different California SDI rate for new employers?
No. California does not assign a special new-employer SDI withholding rate. The standard 2026 employee SDI rate is 1.3%.
How often must employers deposit California SDI?
The deposit frequency depends on the employer's federal deposit requirement and accumulated California PIT withholding. Depending on those factors, California SDI deposits may be required quarterly, monthly, semiweekly or by the next business day.
Does California SDI apply to remote employees?
It may. For employees performing services in multiple states, California uses localization, base of operations, direction and control, and residence tests to determine which state's employment tax rules apply.
