Who Pays California SDI Tax: Employees, Exemptions, and Opt-Ins

In California, the State Disability Insurance tax is paid entirely by employees through payroll withholding. Employers do the paperwork, but they don’t put in any of their own money. For 2026, the rate is 1.3% of your gross wages with no cap on the amount of earnings subject to the tax.¹

What the Deduction Looks Like on Your Paycheck

Each pay period, your employer withholds the SDI contribution from your gross wages before cutting your check. On your pay stub the line usually reads “CASDI” or “CA SDI EE.” The EE matters: it stands for employee, and that’s who the money comes from. Your employer then forwards the withheld amount to the Employment Development Department along with other state payroll taxes.²

This is different from unemployment insurance, where California employers pay a separate tax out of their own funds. SDI has no matching employer share. The program is funded entirely by workers.³

The rate has climbed recently. It was 1.1% in 2024, 1.2% in 2025, and 1.3% in 2026. Senate Bill 951 removed the taxable wage ceiling starting January 1, 2024, so every dollar you earn is now subject to the deduction. Before that change, SDI only applied to wages up to about $153,000 in 2023. At the 2026 rate, someone earning $200,000 pays $2,600 for the year.⁴

What Your Contribution Buys

SDI funds two wage-replacement programs: Disability Insurance for non-work-related illness, injury, pregnancy, or childbirth, and Paid Family Leave for bonding with a new child, caring for a seriously ill family member, or certain military family events.⁵

For claims filed starting in 2025, benefits replace 70% to 90% of your regular wages, with lower earners getting the higher rate. The projected maximum weekly benefit for 2026 is $1,710.⁶

Workers Who Don’t Pay SDI

Most Californians working for an employer contribute, but several groups are excluded by law:

Federal government employees, who are covered under separate federal programs.⁷
State and local elected officials and members of a legislative body or the judiciary.⁸
Employees of other state governments or their political subdivisions performing services in California.⁸
Employees of churches or religious orders.⁹
Temporary workers hired by state or local government for emergencies such as fires, floods, or earthquakes.⁸

Household workers are covered once their employer crosses a threshold: if a household pays a domestic worker $750 or more in cash wages in a calendar quarter, SDI withholding and reporting kicks in on those wages.¹⁰

Self-Employed Workers Pay Only If They Opt In

Sole proprietors, independent contractors, and partners have no SDI withheld automatically because no employer is cutting their paycheck. If you want the same DI and PFL coverage W-2 employees get, you can enroll in the Disability Insurance Elective Coverage program.¹¹

You need a net profit of at least $4,600 per year to qualify, and you need to keep hitting that number. If your net income falls below $4,600 for three consecutive years, the EDD can cancel coverage effective January 1 of the following year. Instead of payroll withholding, DIEC participants get a quarterly statement from the EDD, with payment due by the last day of the month after each quarter ends.¹¹¹²

What About Employers With Voluntary Plans?

Some employers offer a state-approved Voluntary Plan in place of standard SDI. If yours does, the money still comes out of your paycheck. It just goes to a private plan rather than to the EDD. The employer isn’t picking up the cost.¹³

California requires voluntary plans to cost employees no more than SDI would, match every SDI benefit with at least one improvement, cover all eligible California employees, win majority written approval from eligible employees before taking effect, and update whenever the state legislature raises SDI benefits. Any individual employee can decline the voluntary plan and stay on standard SDI.¹³

1
EDD – CA.gov. January 2026 Disability Insurance (DI) Fund Forecast
2
Employment Development Department. Employer Requirements
3
EDD – CA.gov. Fact Sheet: State Disability Insurance Program (DE 8714C)
4
EDD – CA.gov. Voluntary Plan General Release Letter 2026
5
Employment Development Department. Disability Insurance and Paid Family Leave Benefits
6
First 5 California. Improvements to Paid Family Leave and Disability Insurance
7
Social Security Administration. POMS: DI 52135.030 – California Public Disability Benefits (PDB)
8
Employment Development Department. Information Sheet: Exempt Employment (DE 231EE)
9
Employment Development Department. Church and Religious Order Employers
10
EDD – CA.gov. Information Sheet: Household Employment
11
Employment Development Department. Disability Insurance Elective Coverage (DIEC)
12
EDD – CA.gov. Disability Insurance Elective Coverage FAQs
13
Employment Development Department. Become a Voluntary Plan Employer