SDI Tax

What is SDI Tax? 

SDI tax stands for State Disability Insurance tax which is a payroll tax of selected states. SDI tax is used to fund a state disability insurance program. This program aims to help workers who are temporarily unable to perform work because of a non-work-related injury, physical or mental disability by providing financial assistance. Again, SDI tax does not apply to all but a few U.S. states. 

It is important to note that California is the only state that has a payroll tax called SDI tax. However, other states have temporary disability insurance (TDI) in place that has a similar objective. Also, SDI tax is generally only paid by employees through employee payroll and not by employers. However, in some states, employers can choose to cover the cost of disability insurance for their employees. New Jersey also has employer contributions to their disability benefits. 

The following states have short-term disability programs in place for eligible employees. 

• California - State Disability Insurance
• Hawaii – Temporary Disability Insurance
• New Jersey – Temporary Disability Benefits
• New York – Disability Benefits Law
• Rhode Island – Temporary Disability Insurance

The SDI tax rate differs per state because each disability insurance program is also different per state. Here are the SDI tax rates for 2021 for each state:

• California - State Disability Insurance. The contribution rate is 1.2% and the maximum amount that can be withheld for each employee per year is $1,539.58.
• Hawaii – Temporary Disability Insurance. Hawaii TDI requires employers to maintain private coverage for temporary disability or set up an approved self-insured plan. They may choose to cover the cost of TDI for their employees. They may also hold up to 0.5% of the employee’s wages up to $5.51 weekly.

• New Jersey – Temporary Disability Benefits. This is funded by both employers and employees. Employee wage deductions are 0.47% on the first $138,200. 
• New York – Disability Benefits Law. New York employers can opt to cover the state disability insurance or withhold 0.5% of eligible employee wages up to $0.60 per week. 
• Rhode Island – Temporary Disability Insurance. Employee payroll deductions are 1.3% of the first $74,000.