California State Disability Insurance (CASDI), also known as California SDI, is a state-run program that provides financial support to employees who cannot work due to a non-work-related illness, injury, or pregnancy. It also covers paid family leave, allowing workers to take time off to care for a seriously ill family member or bond with a new child. CASDI is funded through a payroll tax that is automatically deducted from employees’ wages.
Understanding how CASDI works is important for anyone employed in California. It affects your paycheck and provides crucial benefits if you ever face a situation where you can’t work temporarily. In this article, we’ll explain what CASDI tax is, and what you need to know about disability benefits and paycheck deductions.
What is CASDI Tax?
CASDI tax is a payroll deduction that funds the California State Disability Insurance program. This tax is automatically taken out of the paychecks of most California employees. The money collected through this tax goes into a fund used to pay benefits to workers who are temporarily unable to work due to illness, injury, pregnancy, or for those who need to take family leave.
The CASDI tax rate is a small percentage of an employee’s wages, and the exact amount can vary from year to year. Employers are responsible for withholding this tax from employees’ wages, and the funds are managed by the California Employment Development Department (EDD). You can find more detailed information about CASDI tax rates and how the program works on the California EDD Disability Insurance page. You can find more detailed information about CASDI tax rates and how the program works on the California EDD Disability Insurance page.
By paying the CASDI tax, workers are essentially contributing to a safety net that provides short-term income replacement when they are unable to work. This allows employees to maintain some financial stability during periods of temporary disability or family-related leave.
How CASDI Benefits Employees
CASDI provides crucial financial support to employees who face temporary disabilities or family-related situations that prevent them from working. The program offers two main types of benefits: disability insurance and paid family leave.
1. Disability Insurance
When employees suffer from a non-work-related injury, illness, or are recovering from childbirth, CASDI steps in to replace a portion of their income. This allows employees to focus on recovery without worrying as much about their financial situation. The benefits can cover a wide range of medical conditions, including physical injuries, mental health issues, or pregnancy-related complications. Generally, if the employee’s condition is certified by a healthcare provider, they are eligible to receive benefits.
Employees who qualify for disability insurance under CASDI can receive payments that typically replace up to 60-70% of their normal wages, depending on their income level. Benefits are available for a maximum of 52 weeks. This can be a huge relief for individuals dealing with serious health conditions or long-term recovery periods, ensuring they still have financial support while they focus on getting better.
You can find more information on how to apply for disability insurance at the California EDD Disability Insurance page.
2. Paid Family Leave
In addition to disability benefits, CASDI also covers Paid Family Leave (PFL), which allows employees to take time off work to care for a loved one or bond with a new child. Paid Family Leave is particularly important for new parents (including adoptive and foster parents), individuals caring for a seriously ill family member, or those who need time to handle certain military-related events for family members on active duty.
The PFL benefit also replaces a percentage of an employee’s wages for up to eight weeks. Unlike disability benefits, Paid Family Leave does not require employees to be physically ill or injured. Instead, it’s designed to support workers during important family events, giving them the opportunity to take time away from work without losing their entire paycheck.
For more information on Paid Family Leave benefits, you can visit the California EDD Paid Family Leave page.
3. How Employees Can Access CASDI Benefits
To receive CASDI benefits, employees need to file a claim with the California Employment Development Department (EDD). For disability insurance, the claim must be backed by a medical certification from a healthcare provider confirming the worker’s condition and expected duration of disability. For Paid Family Leave, employees must provide documentation related to the family event they are taking leave for, such as a birth certificate or a doctor’s note for a sick relative.
Once the claim is filed and approved, employees start receiving payments, usually within a few weeks. Payments are either deposited directly into a bank account or issued through a debit card. CASDI benefits are tax-free, which helps maximize the financial support employees receive during their time off.
4. Flexibility and Financial Protection
One of the major advantages of CASDI is its flexibility in supporting a wide variety of life situations that may prevent an employee from working. Whether it’s a temporary medical issue, pregnancy, caring for a family member, or bonding with a new child, CASDI offers a layer of financial protection. This reduces stress for employees during tough times and helps them return to work in better health or with a balanced personal life.
Overall, CASDI benefits ensure that employees in California don’t have to choose between their health or family and their financial well-being. It provides a vital cushion for those experiencing temporary work absences, offering peace of mind and security when it’s needed most.
How is CASDI Calculated?
CASDI contributions are calculated as a percentage of an employee’s wages, and the rate is determined annually by the California Employment Development Department (EDD). The amount deducted from each employee’s paycheck is capped to ensure that individuals don’t contribute beyond a certain limit, even if they earn a high salary.
1. CASDI Tax Rate and Wage Base
The CASDI tax rate can vary slightly from year to year based on the financial needs of the disability insurance fund. For 2024, for example, the CASDI tax rate is 0.9% of an employee’s gross wages. However, there is a limit to the wages subject to the CASDI tax, known as the taxable wage base. In 2024, this wage base is capped at $153,164. This means that once an employee’s earnings reach this threshold, they stop contributing to CASDI for the rest of the year.
For instance, if an employee earns $100,000 annually, the CASDI deduction would be 0.9% of their total earnings, which amounts to $900 for the year. However, if an employee earns $160,000, the CASDI deduction will only be calculated up to the wage base of $153,164. Therefore, their maximum contribution would be $1,378.48 in 2024 (0.9% of $153,164).
2. Employer Contributions
It’s important to note that CASDI is funded entirely by employee contributions—employers do not pay into the system. Employers are responsible for withholding the correct amount from employees’ paychecks and submitting these funds to the California EDD. This ensures that all eligible employees are covered by the disability insurance program.
3. Impact on Take-Home Pay
CASDI contributions directly impact an employee’s take-home pay since the tax is automatically deducted from wages. While the CASDI tax is a relatively small percentage of earnings, it can add up over time, especially for higher-income employees. However, the benefits provided by CASDI—such as temporary disability and paid family leave—are essential safety nets that help workers manage income loss during times of personal or family health challenges.
4. Calculating CASDI in a Paycheck
For an employee to see how CASDI affects their paycheck, they can look for the CASDI or SDI deduction on their pay stub. It’s typically labeled as “CASDI” or “SDI” and is listed alongside other payroll deductions like federal income tax, Social Security, and Medicare.
For example, if an employee earns $5,000 per month:
- CASDI deduction: 0.9% of $5,000 = $45 per month.
If this employee works for a full year without exceeding the wage base, they would contribute a total of $540 to CASDI for that year.
5. Why the Calculation Matters
Understanding how CASDI is calculated can help employees better manage their finances. Since the deduction is mandatory and automatic, it’s important to know how much will be withheld from each paycheck. While the CASDI deduction can slightly reduce take-home pay, the benefits it offers in case of illness, injury, or family leave can be invaluable.
For more detailed information on current CASDI rates and the wage base, you can refer to the official California EDD Disability Insurance page.
Does California Tax Social Security?
No, California does not tax Social Security benefits. Unlike some other states, California exempts Social Security income from state taxation. This means that individuals receiving Social Security benefits, whether from retirement, disability, or survivors’ benefits, do not have to include these amounts as taxable income on their California state tax return.
1. Federal vs. State Taxation
While California does not tax Social Security, it’s important to note that Social Security benefits may still be subject to federal taxes depending on an individual’s overall income. If your combined income from Social Security and other sources, such as wages or retirement income, exceeds certain federal thresholds, a portion of your Social Security benefits may be taxed by the federal government. However, California residents can rest assured that no state taxes will be levied on these benefits.
2. What Types of Social Security Benefits Are Exempt?
All types of Social Security benefits are exempt from California state taxes. This includes:
- Retirement benefits for seniors who have reached the required age to claim Social Security.
- Disability benefits for those who cannot work due to a disabling condition (also known as Social Security Disability Insurance, or SSDI).
- Survivors’ benefits for families of deceased workers.
- Supplemental Security Income (SSI), which provides additional assistance to elderly, blind, or disabled individuals with limited income and resources.
No matter which type of Social Security benefit you receive, none of it will be taxed at the state level in California.
3. Why Doesn’t California Tax Social Security?
California’s tax policies are designed to offer some relief to retirees and individuals who rely on Social Security for their income. By exempting Social Security benefits from state income tax, California allows these individuals to retain more of their income, which can be particularly important for retirees and those on fixed incomes.
4. Other States’ Policies
It’s important to note that tax policies on Social Security vary by state. Some states tax Social Security benefits fully or partially, while others, like California, offer complete exemptions. If you plan to move from California to another state, it’s a good idea to check the state tax laws there to understand how your Social Security income will be treated.
5. What About Other Retirement Income?
While California does not tax Social Security benefits, other types of retirement income—such as pensions, 401(k) distributions, and IRA withdrawals—are generally subject to state income tax. This makes it important to understand how different sources of income will be taxed in California as you plan for retirement.
For more details on California’s tax policies and Social Security, you can refer to the California Franchise Tax Board, which offers comprehensive information about state income tax laws.
Are There Exemptions from CASDI?
While the California State Disability Insurance (CASDI) program is mandatory for most employees in California, there are some exemptions. Not all workers are required to pay into CASDI through payroll deductions, and certain groups or individuals may qualify for these exemptions based on specific criteria.
1. Self-Employed Individuals and Independent Contractors
Generally, self-employed individuals and independent contractors are not automatically enrolled in CASDI. Since CASDI contributions are deducted from payroll, and self-employed workers do not receive a regular paycheck from an employer, they are exempt from paying into the program. However, self-employed individuals or independent contractors can opt into the program voluntarily by applying for coverage through the EDD’s elective coverage program. This allows them to receive CASDI benefits in the future, should they qualify.
2. Employees of Certain Religious Organizations
Workers employed by religious organizations may also be exempt from CASDI contributions. Religious groups that are opposed to insurance programs like disability insurance for philosophical or doctrinal reasons can apply to exempt their employees from CASDI. In this case, the employee would not have CASDI deductions taken from their paycheck, and they would not be eligible for CASDI benefits unless the employer later decides to participate.
3. Employees Covered by Union Plans or Private Plans
Some employees may be covered by voluntary disability plans provided through their employer, typically in partnership with a union or other worker organizations. These voluntary plans must offer benefits equal to or better than those provided by CASDI. If an employee is covered by such a private plan, they are exempt from paying into CASDI, though the voluntary plan might involve separate deductions or contributions. Employers that offer voluntary plans must get approval from the California Employment Development Department (EDD) to ensure their plan meets state standards.
4. How to Apply for Exemptions
For employees in religious organizations or those opting into elective coverage, applying for an exemption or voluntary enrollment is generally handled through the EDD. Employers and employees must follow the necessary procedures to ensure proper documentation and approval of their exempt status.
5. What Happens if You’re Exempt?
Employees who are exempt from CASDI do not pay the CASDI payroll tax and, in turn, do not qualify for CASDI benefits if they experience a disability or need to take family leave. This means that if an exempt employee becomes temporarily disabled or requires paid family leave, they will not have access to the wage replacement benefits that CASDI provides unless they are covered by another disability insurance plan.
If you’re unsure whether you are exempt or eligible, it’s important to check your pay stub or consult with your employer to see whether CASDI deductions are being made. If you’re in an exempt group but wish to be covered by CASDI, you may be able to opt into the program voluntarily.
For more information on CASDI exemptions and voluntary plans, visit the California EDD Disability Insurance page.
