What Does SDI Tax Mean?
An SDI tax is a State Disability Insurance tax. It is a payroll tax required by select states. The money from an SDI tax is put into a state disability insurance program that provides financial assistance to workers who lose the ability to work due to physical or mental disability not directly related to their profession. The only state that has a tax specifically called an SDI tax is California, but several other states have temporary disability insurance (TDI) that functions similarly. An SDI tax is paid through employee payroll as opposed to workers’ compensation insurance, which is paid for by employers.
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Which States Have an SDI Tax?
There are five states in the United States that currently provide a temporary disability insurance plan.
- New Jersey
- New York
- Rhode Island
What Is the SDI Tax Rate?
Temporary disability insurance programs vary by state, so each has its own rate for taxation. Here are the tax rates as of 2020 for each state with a temporary disability program:
- The California SDI tax rate is 1.00 percent of SDI taxable wages per employee per year. The maximum tax is $1,229.09 per employee per year.
- Hawaii employers may choose to cover the cost of temporary disability insurance for their employees or may hold up to 0.5 percent of an employee’s weekly wages up to a maximum of $5.60.
- In New Jersey, the employee contribution rate for temporary disability is set at 0.26 percent of the taxable wage base, which is $134,900. This equals a maximum contribution of $350.74 per year for employees.
- New York employers can choose to cover the cost of state disability insurance for their employees or can withhold up to $0.60 of eligible employees wages per week.
- The Rhode Island Temporary Disability Insurance tax is 1.3 percent of an employee’s pay.
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