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What is SDI Tax? | HRMantra
2-3 minute
What does SDI tax mean?
The SDI tax is a state disability insurance tax. It is a payroll tax required by select states. The money from the SDI tax is put into the state disability insurance program that provides financial assistance to workers who lose the ability to work due to a physical or mental disability that is not directly related to their profession. The only state that has a tax specifically called the SDI tax is California, but many other states have temporary disability insurance (TDI) that works similarly. The SDI tax is paid through employee wages, not through workers' compensation insurance, which is paid by employers.
Which states have SDI tax?
There are five states in the United States that currently offer temporary disability insurance plans.
- California
- Airport
- new Jersey
- New York
- Rhode Island
What is the SDI tax rate?
Temporary disability insurance programs vary by state, so each state's tax rate is different. 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 withhold up to 0.5 percent of an employee's weekly pay (up to $5.60).
- The employee contribution rate for temporary disability in New Jersey is set at 0.26 percent of the taxable wage base, which is $134,900. This equates to 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 deduct up to $0.60 per week from eligible employees' wages.
- The Rhode Island temporary disability insurance tax is 1.3 percent of the employee's pay.
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