CASDI (California State Disability Insurance): What It Means for Employers

What it means in practice

What CASDI is. CASDI is the label California employees see on their pay stubs and Forms W-2 for State Disability Insurance withholding. EDD's eligibility pages say SDI deductions are "shown as CASDI on their paystub." EDD explains that SDI lets the Disability Fund pay two benefits: Disability Insurance (DI), for workers who lose wages because of a non-work-related illness, injury or pregnancy, and Paid Family Leave (PFL), for workers who take time off to care for a seriously ill family member, bond with a new child, or take part in a qualifying event tied to a family member's military deployment abroad. EDD Disability Insurance is the name of the benefit program; CASDI is the payroll deduction that funds it. This page covers California only. For how disability insurance taxes work in other states, see SDI tax.

Who pays it. California has four state payroll taxes. EDD's 2026 California Employer's Guide (DE 44) says Unemployment Insurance and Employment Training Tax are employer-paid contributions, while SDI and Personal Income Tax are withheld from employee wages. EDD's Employer Requirements page states that "employers do not pay for the DI or PFL benefits," but they must withhold and send SDI contributions, tell employees about their benefit rights, and respond when employees file claims. If an employer pays the SDI itself without withholding it, DE 44 says the W-2 should show the tax as if it were withheld, with the amount increased under EDD's formula for taxes paid by an employer (DE 231Q); see gross-up. For the full picture of employer-paid taxes, see employer payroll taxes.

The rate and the missing wage limit. EDD lists the SDI withholding rate as 1.3% for 2026 and 1.4% for 2027. Through 2023, SDI stopped once an employee's wages reached a yearly ceiling: EDD's rate table (DE 3395) shows a $153,164 limit for 2023. EDD states that, effective January 1, 2024, Senate Bill 951 removed the taxable wage limit and maximum withholdings for each employee, so the rate now applies to every dollar of subject wages. DE 44 adds that the SDI rate is set by law, may change each year, and may be adjusted annually to not more than 1.5% or less than 0.1% depending on the balance in the Disability Fund. For how capped wage bases work in other payroll taxes, see taxable wage base.

What counts as subject wages. DE 44 defines subject wages as all wages unless excluded under the California Unemployment Insurance Code, and says they are used to determine DI and PFL benefits. Subject wages and California PIT wages are usually the same, but not always. EDD's Types of Payments information sheet (DE 231TP) lists employee contributions to a 401(k) plan as subject to SDI (unless the benefit is under a section 125 cafeteria plan), even though they are generally not PIT wages. The same sheet lists section 125 cafeteria plan payments for purposes such as health insurance as generally not subject to SDI. Payments covered by the federal Railroad Retirement Tax Act are listed as not subject. For the federal side, see pre-tax deduction.

Who is covered and who is not. DE 44 says California law requires employers to provide coverage for employees with payroll over $100 in a calendar quarter, with a few exceptions. It names some domestic workers, some governmental employees, employees of interstate railroads, employees of some nonprofit agencies, and individuals claiming a religious exemption. EDD's Types of Employment sheet (DE 231TE) gives more detail: household employment becomes subject to SDI once $750 or more in cash is paid in a calendar quarter; employees of cities, counties, local public agencies and schools are not subject unless employed by a district hospital or certain public housing agencies, or an approved elective coverage agreement is in effect; employees of churches and church-controlled religious organizations are not subject unless an exception applies; and family employees of sole proprietorships and partnerships (a child under 18 working for a parent, or a person working for their child or spouse or registered domestic partner) are not subject unless elective coverage is in place. A corporate officer who is the sole shareholder, or the only shareholder other than a spouse or registered domestic partner, may file an SDI exclusion statement (DE 459).

Elective coverage for exempt workers. EDD's Specialized Coverage sheet (DE 231SC) explains that some employers can elect SDI coverage for workers the law exempts. Local public entities, public schools and agencies, community college districts and Indian tribes can elect SDI-only coverage, often through a negotiated agreement or a majority employee petition. Nonprofit employers with exempt workers can elect coverage by majority petition, and sole proprietors or partners can elect SDI for exempt family members. DE 231SC says an election must stay in effect for at least two complete calendar years, and termination requests must be filed in January.

Self-employed people. Sole proprietors, independent contractors and other business owners do not have SDI withheld, but EDD offers Disability Insurance Elective Coverage (DIEC). EDD lists the 2026 DIEC premium as 8.84% of the net profit reported on the 2024 Schedule SE or Schedule C, with a minimum 2026 annual premium of $406.64 for net profit of $4,600 or less, paid in four quarterly installments. Participants must report at least $4,600 of annual net profit, must participate for at least six months before applying for benefits, and must stay in the plan for two full calendar years before canceling. For employers, EDD points to its guidance on reporting wages after a worker misclassification assessment (DE 231MW); see independent contractor.

Voluntary plans. An employer can replace state SDI with an EDD-approved Voluntary Plan (VP). EDD says a VP needs written approval from a majority of eligible employees, must be offered to all eligible California employees, must provide all SDI benefits plus at least one better benefit, cannot cost employees more than SDI, and must match any legislated SDI benefit increase. Employees can reject the VP and keep SDI. The employer applies on form DE 2520BV at least 30 days before the requested start date and must post a security deposit. Once approved, the employer no longer sends SDI withholding to EDD for VP-covered employees; it holds their contributions in a separate trust fund, pays a quarterly assessment to EDD, and remains responsible for any deficit. EDD lists the 2026 assessment rate as 0.00182 (1.3% x 14%). DE 44 tells VP employers to label the W-2 box 14 amount "VPDI."

Step by step for an employer. (1) Register with EDD and confirm which employees and payments are subject to SDI using DE 231TE and DE 231TP. (2) Withhold the current rate (1.3% in 2026, 1.4% in 2027) from all subject wages each payday, with no annual cutoff. (3) Deposit SDI with withheld PIT on the Payroll Tax Deposit (DE 88). DE 44 says SDI and PIT deposit due dates depend on the employer's federal deposit schedule and how much PIT it has accumulated; if accumulated PIT is under $350, all four taxes are due quarterly. See federal tax deposit for the federal schedules. (4) File the Quarterly Contribution Return and Report of Wages (DE 9), which reconciles tax and withholding with deposits, and the DE 9C, which reports each employee's total subject wages, PIT wages and PIT withheld. Both are filed electronically. (5) At year end, show SDI withheld on Form W-2.

Filing dates and penalties. DE 44 lists the DE 9 and DE 9C as due on the first day of the month after each quarter. For the fourth quarter of 2026, both are due January 1, 2027 and delinquent if not filed by February 1, 2027. DE 44 states a penalty of 15% plus interest on late payroll tax payments, a $20 per employee wage item penalty for late or unreported wages, and a $50 penalty plus interest for filing a paper DE 9 and DE 9C. DE 44 says wages are reported when paid, not when earned.

Form W-2 reporting. DE 44 says that, in addition to federal information, California employers must show SDI tax withheld in box 14 using the abbreviation "CASDI" or "SDI." If wages were not subject to SDI, DE 44 says to show CASDI 0. If no box is available, a separate written statement is required. The IRS General Instructions for Forms W-2 and W-3 (2026) say box 14 has been split into box 14a (Other) and box 14b (tipped occupation codes), and list "state disability insurance taxes withheld" as an example for box 14a. DE 44 says 2026 Forms W-2 must reach employees by February 1, 2027. See W-2 form.

Benefits CASDI pays for. EDD says DI pays between $50 and $1,765 a week for up to 52 weeks, at 70% to 90% of the wages earned 5 to 18 months before the claim start date. PFL pays the same weekly range for up to 8 weeks in a 12-month period. Workers must have earned at least $300 in their base period with SDI deducted. EDD stresses that DI and PFL provide benefit payments but not job protection. Job protection may come from the federal FMLA or the California Family Rights Act, covered on California labor laws. DE 44 adds that employees are generally not eligible for SDI while receiving workers' compensation benefits unless the SDI rate is greater.

How workers file claims (high level). EDD's claim pages say workers file DI claims through myEDD and SDI Online or on paper form DE 2501, and PFL claims online or on form DE 2501F. For DI, EDD recommends filing no earlier than nine days and no later than 49 days after the disability begins, requires a medical certification, and applies an unpaid seven-day waiting period. PFL claims should be filed no later than 41 days after family leave begins. Workers covered by a voluntary plan file with their employer instead.

Employer duties when claims are filed. EDD says employers must give the Disability Insurance Provisions brochure (DE 2515) and the Paid Family Leave brochure (DE 2511) to new hires and to employees who ask for qualifying time off, and post the Notice to Employees (DE 1857A). When a claim is filed, EDD sends a Notice to Employer of Disability Insurance Claim Filed (DE 2503) or a Notice of PFL Claim Filed (DE 2503F), which the employer must complete and return within two working days. DE 44 notes that DI and PFL claims do not affect the employer's Unemployment Insurance reserve account.

Example 1 (illustration): a regular paycheck. An employee earns $3,000 every two weeks in 2026, all subject wages. SDI is $3,000 x 1.3% = $39.00 per paycheck, or $1,014.00 over 26 paychecks. At the 2027 rate, the same paycheck would carry $42.00.

Example 2 (illustration): the effect of SB 951. An employee earns $400,000 in 2026. With no wage limit, SDI is $400,000 x 1.3% = $5,200.00, withheld across the whole year. In 2023, under the old rules in DE 3395, withholding would have stopped at the $153,164 ceiling, for a maximum of $1,378.48 at 0.9%.

Example 3 (illustration): deductions. An employee earns $5,000 in a month in 2026, defers $500 to a 401(k) plan, and pays $200 of health premiums through a section 125 cafeteria plan. Under DE 231TP, the 401(k) deferral stays in subject wages and the cafeteria plan amount generally comes out, so SDI applies to $4,800, giving $62.40.

Question: Is CASDI deductible for the employee? The IRS Instructions for Schedule A (2025) list mandatory contributions to the California Nonoccupational Disability Benefit Fund and the California Paid Family Leave program among state and local income taxes for itemized deductions.

This entry summarizes California EDD and IRS guidance and does not decide whether a particular worker or payment is subject to SDI.

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