The SDI deduction on your paycheck is a mandatory contribution to your state’s short-term disability and paid family leave programs, taken as a percentage of your gross wages. Only five states require it: California, Hawaii, New Jersey, New York, and Rhode Island. In exchange for that withholding, you get access to 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.
Which States Take an SDI Deduction
If you don’t work in one of the five states above, you won’t see this line on your pay stub at all. The programs go by different names depending on the state. California uses State Disability Insurance (SDI). New Jersey and Rhode Island call theirs Temporary Disability Insurance (TDI). Hawaii also uses TDI, and New York labels its version Disability Benefits (DB) with a separate Paid Family Leave program running alongside it.1Justia. Short-Term Disability Benefits Under State Laws
A common assumption is that SDI comes entirely out of your paycheck. That’s true in California and Rhode Island. In Hawaii, New Jersey, and New York, employers are also required to contribute.2Department of Labor, Office of Unemployment Insurance. Temporary Disability Insurance Either way, the employee share still shows up on your stub.
How Much Comes Out of Your Check
The math is straightforward: your gross wages multiplied by the state’s rate. Most states cap the deduction at an annual taxable wage limit, so once your year-to-date earnings hit the ceiling, the withholding stops until the following January. Rates and caps for 2026 vary quite a bit.
California
California’s 2026 SDI 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 higher earners now pay considerably more than they used to. An employee earning $150,000 contributes $1,950 for the year; someone at $400,000 pays $5,200.
New Jersey
New Jersey splits the withholding into two line items: Temporary Disability Insurance at 0.19% and Family Leave Insurance at 0.23%, both applied to the first $171,100 of 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% up to the cap, with a maximum annual employee contribution of roughly $719.
Rhode Island
Rhode Island’s 2026 TDI rate is 1.1% on the first $100,000 in wages, for a maximum annual employee contribution of $1,100.5Rhode Island Department of Labor and Training. 2026 Tax Rates for Unemployment Insurance and Temporary Disability Insurance
Hawaii
Hawaii works a little differently. Employers can withhold up to 0.5% of weekly wages for TDI, but the weekly deduction is capped at $7.50, or about $390 a year.6Hawaii Department of Labor and Industrial Relations. 2026 Maximum Weekly Wage Base and Maximum Weekly Benefit The employer must cover at least half the plan’s total cost.
New York
New York has two separate deductions. For Disability Benefits, employees contribute up to $0.60 per week, or about $31 per year. For Paid Family Leave, the 2026 rate is 0.432% of gross wages, with a maximum annual contribution of $411.91.7Workers’ Compensation Board. Employee Disability Benefits
In states with a cap, once your year-to-date earnings cross it, the deduction disappears until January.
What the Money Actually Buys You
Your contributions fund two related but distinct benefit programs: disability insurance for your own medical conditions, and paid family leave for caregiving and bonding.
Disability Insurance
Disability Insurance replaces part of your wages when a non-work-related illness, injury, or pregnancy prevents you from working. The “non-work-related” piece matters. On-the-job injuries fall under workers’ compensation, a completely separate system funded by employers. DI covers things like surgery recovery, a difficult pregnancy, a serious illness, or a mental health condition that keeps you from doing your job.
Paid Family Leave
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 certain military family needs. PFL usually pays at the same rate as DI, but for a shorter maximum period.
How Much You’d Receive
Wage replacement across the five states runs from 50% to 90% of average weekly wages, always subject to a weekly cap. California replaces 70% to 90% (lower earners get the higher percentage) up to $1,765 per week in 2026.9Employment Development Department. Contribution Rates and Benefit Amounts California DI lasts up to 52 weeks; California PFL is capped at eight weeks in 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, and combined DB and PFL cannot exceed 26 weeks in any 52-week period.7Workers’ Compensation Board. Employee Disability Benefits New Jersey, Rhode Island, and Hawaii fall in between, each with its own formula and caps. Your actual benefit is based on earnings in a “base period,” typically the 12 months ending five to seven months before your claim, so check your state labor department’s calculator for the specific number.
Qualifying and Filing
Eligibility rules share a common shape across all five states, even where the numbers differ.
- Earnings history: You need at least a minimum amount of wages during a base period before your claim. If you started a new job recently and haven’t accumulated enough, you may not qualify.
- Medical certification: For a DI claim, a licensed healthcare provider must document your condition and confirm you can’t perform your regular work. For a PFL caregiving claim, the family member’s serious health condition must also be certified.
- Waiting period: Most states impose an unpaid waiting period before benefits start. California requires seven consecutive days of disability before any benefits are payable, and those seven days are themselves unpaid.11Legal Information Institute. California Code of Regulations Title 22 2627(b)-1 – Waiting Period
- Employment status: You must have been employed or actively looking for work when the disability or need for leave began.
Filing deadlines are strict. In New York, disability claims must be filed 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 family leave begins.12Employment Development Department. Paid Family Leave Claim Process Missing these windows can result in denial. Check your state’s rules as soon as you know you’ll need to file.
SDI Does Not Protect Your Job
This one catches people off guard. Collecting disability or paid family leave benefits does not obligate your employer to hold your position open. SDI is a wage-replacement program, nothing more.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 (FMLA) gives eligible employees up to 12 weeks of unpaid, job-protected leave per year, meaning your employer has to 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 at the same time: SDI pays some of your wages, FMLA keeps your job open. If you don’t qualify for FMLA because your employer is too small or you haven’t been there long enough, collecting SDI benefits alone will not stop your employer from filling your position. Confirm your FMLA eligibility with HR before you go out on an extended leave.
Are SDI Benefits Taxable?
The tax rules are less obvious than most people expect, and they differ by benefit type.
In California, regular DI benefits are generally not taxable at the federal or state level. The exception: if you were collecting unemployment and then became disabled, the DI you receive in place of unemployment is federally taxable.15Employment Development Department. Tax Information (Form 1099G)
PFL is different. California PFL payments are taxable on your federal return but not on your California return, and the state sends you a Form 1099-G reporting the taxable amount.16Internal Revenue Service. Instructions for Form 1099-G (03/2024) New York PFL benefits are also subject to federal income tax. No SDI state taxes its own DI benefits at the state level, but federal treatment varies enough that it’s worth reading any 1099-G you receive carefully and considering whether to have taxes withheld from benefit payments so you don’t get a surprise bill in April.
What If Too Much Was Withheld
If you worked for two or more employers in the same year in a state with a taxable wage cap, each one withholds SDI on its own. Neither knows what the other did, so your combined contributions can end up above the annual maximum. When that happens, you’re entitled to a refund of the excess.
In California, you claim the refund as a credit on your state income 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 a credit. Other states with wage caps have similar recovery processes through their tax returns or labor departments.
Note that California eliminated its taxable wage cap starting in 2024, so the multiple-employer overpayment issue no longer applies there. It still matters in New Jersey, Rhode Island, and any other capped state.
Voluntary Plans and Self-Employed Workers
Several states let employers opt out of the state-run program by setting up a Voluntary Plan through a private insurer. California, New Jersey, New York, and Hawaii all permit this.18Employment Development Department. Voluntary Plan A voluntary plan must provide benefits that meet or exceed the state program. If your employer uses one, the paycheck deduction still appears, but the money goes to the private plan administrator instead of the state, and your benefits and rights remain at least as generous as the state program.
Self-employed workers and independent contractors generally aren’t covered by SDI because no employer is withholding contributions for them. California offers a Disability Insurance Elective Coverage program that lets sole proprietors and independent contractors opt in. To participate, you need a net profit of at least $4,600 per year, and there’s a six-month waiting period after enrollment before you can file a claim.19Employment Development Department. Disability Insurance Elective Coverage (DIEC) If you’re self-employed in one of the other four states, check with your state’s labor department about any opt-in options.