CASDI: What It Is and How to Withhold It
CASDI is California State Disability Insurance, an employee-funded payroll deduction. The 2026 rate, why the wage cap is gone, and what employers must do.
CASDI
California State Disability Insurance: what the deduction is, the current rate, the wage cap that no longer exists, and exactly what an employer has to do
Someone on your team is holding a pay stub, pointing at a line that says CASDI-E, and asking what it is and why it went up. And if you have just hired your first California employee, there is a reasonable chance you are asking the same question.
This page covers what CASDI actually is, the current rate, why the wage cap no longer exists, exactly what you have to do as an employer, and what happens when it goes wrong. Getting it right matters, because a large number of the pages currently explaining CASDI are wrong.
The outdated ones cite a rate of 1.1 or 1.2 percent. They mention a wage ceiling, a maximum contribution, or a figure like $1,378.48. Those things were true once. They are not true now, and an employer configuring payroll from a stale page will under-withhold every check.
I build FirstHR, which is where employee records live, including which state each person actually works in, and that turns out to matter a great deal here. One caveat before you go further: this is state tax law, the rate changes annually, and I am not a tax professional. Verify against the Employment Development Department (EDD) before you configure anything.
What Is CASDI?
CASDI is California State Disability Insurance: a mandatory, employee-funded payroll deduction that every California employer must withhold and remit to the state.
Three points in that definition cause most of the confusion, so here they are plainly.
First, CASDI and SDI are the same thing, with no separate deduction: SDI is the program name, and CASDI is the label California pay stubs give it. Second, Paid Family Leave (PFL) has no deduction of its own, because it is funded from the same pot. Third, you as the employer pay none of it, which makes CASDI unusual among payroll taxes.
The Current Rate
The California SDI rate for 2026 is 1.3 percent of SDI-subject wages (gross pay less Section 125 deductions such as health coverage or dependent care), and there is no wage cap. This is the part most competing pages get wrong, so here it is with the source attached.
The benefit side of the same program is published on the EDD contribution rates and benefit amounts page, which is the single authoritative source for both the rate you withhold and the benefit your employees can claim. Bookmark it and check it every January.
The removal of the wage ceiling in 2024 is the change that produces the most employee questions. Before 2024 a high earner stopped contributing partway through the year once their wages crossed the ceiling, and take-home pay visibly increased. That no longer happens: someone earning $400,000 pays 1.3 percent on every SDI-subject dollar of it.
If your payroll system still has a cap configured, it is producing incorrect paychecks, and you will not find out until a reconciliation or an audit. Check it.
Who Pays It
The employee pays 100 percent of CASDI. There is no employer share. This surprises people, because it is unlike almost everything else in payroll.
| Tax | Employee pays | Employer pays |
|---|---|---|
| Social Security | 6.2% | 6.2%. You match dollar for dollar |
| Medicare | 1.45% | 1.45%. You match this too |
| Federal income tax | Per the W-4 | Nothing. You withhold only |
| Federal unemployment (FUTA) | Nothing | All of it. Employee never sees it |
| California UI and ETT | Nothing | All of it. Employer-funded |
| CASDI | 1.3% of SDI-subject wages, no cap | Nothing. No employer share at all |
The employer-paid side, meaning unemployment insurance and the employment training tax, is set out on the EDD's tax-rated employers page, which also confirms that the SDI rate cannot be protested and is set by law.
Read the last two rows together, because that is the California picture in miniature. Unemployment insurance and the employment training tax are entirely employer-funded. CASDI is entirely employee-funded. They sit on opposite sides of the same paycheck.
Being a collection agent rather than a contributor does not reduce your exposure. The money you withhold is not yours, and failing to remit it is your problem, not the employee's. This is the same category of obligation as federal withheld tax: trust fund money.
What Employers Must Do
You have six CASDI obligations as an employer: register with the EDD, withhold, show the deduction on the pay stub, deposit it, file quarterly returns, and report the year total on the W-2. The arithmetic is the easiest of them.
There is one lawful way out of the state program, and it is not a loophole: an EDD-approved Voluntary Plan.
A Voluntary Plan is a private disability plan that must offer every benefit the state plan offers, must be better in at least one respect, cannot charge employees more than the state rate, and needs approval from a majority of your employees and from the EDD. Almost no small business goes that route, so for everyone else the obligations look like this.
The EDD publishes the filing schedule and due dates, and it is worth putting them on a calendar rather than relying on memory, exactly as with federal deposits. The deadlines do not move because you were busy.
Your CASDI deposit schedule is separate from your pay schedule. The difference between how often you pay people and how often you hand money to a tax authority trips up nearly every first-time employer.
A Worked Example
The calculation is trivial: SDI-subject wages times the rate. Here it is anyway, because the last row is what people actually need to see.
One configuration detail that catches people: the withholding base starts from gross wages, and only some pre-tax deductions reduce it. A traditional 401(k) contribution reduces federal income tax but does not reduce the base for CASDI, in the same way it does not reduce the base for Social Security and Medicare.
Section 125 cafeteria plan deductions, meaning pre-tax benefit elections, work the other way. According to the EDD's Taxability of Employee Benefits information sheet (DE 231EB), an employee's salary reduction for health, accident, dependent care, or group-term life coverage under a cafeteria plan is not subject to SDI, so it comes off the base.
Running that same arithmetic across your own payroll is how a stale rate or a leftover wage cap actually surfaces: as a difference that is not zero. This worksheet does it per pay period, then ties the year total to the figure that ends up in W-2 Box 14.
| A | B | C | D | E | F | G | H | I | |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Employee | State where the work is performed | Pay date | Gross wages this period | Rate applied (%) | CASDI that should be withheld | CASDI actually withheld | Difference | Notes |
| 2 | Example: A. Rivera | California | 4000 | 1.3 | 52 | Gross times the rate, which is the worked example above | |||
| 3 | |||||||||
| 4 | |||||||||
| 5 | |||||||||
| 6 | |||||||||
| 7 | |||||||||
| 8 | |||||||||
| 9 | |||||||||
| 10 | |||||||||
| 11 |
On the Pay Stub
On the pay stub, the deduction usually appears as CASDI-E or CA SDI. Your employees will ask about this line, so here is what each label means and what to tell them.
| What they see | What it means |
|---|---|
| CASDI-E | California State Disability Insurance, employee contribution. The most common label |
| CA SDI | The same thing. Different payroll systems label it differently |
| SDI | Also the same thing. There is only one program |
| VPDI | A Voluntary Plan disability contribution, if your employer has an approved private plan instead |
| No separate PFL line | Correct. Paid Family Leave is funded from the same SDI deduction |
The -E suffix means employee, and it exists to distinguish the employee contribution from an employer one. Since there is no employer contribution at all, the suffix is something of a leftover, but it is still what most systems print.
Giving employees a way to pull their own stubs and W-2s through an employee self-service portal cuts most of these questions off before they reach you, because the person who wants to check a number can simply go and check it.
California has strict wage statement requirements, and the deduction must be itemized clearly rather than lumped into a generic taxes line. A stub the employee cannot read is not only unhelpful; in California it is potentially a compliance problem in its own right.
On the W-2
CASDI goes in Box 14 of the W-2, as a labeled line showing the total withheld for the year. The EDD's 2026 California Employer's Guide (DE 44) tells employers to report the SDI withheld there, under its abbreviation.
Box 14 is the box for other information the employer wants to report, and it is where state disability contributions belong. The amount does not go in Box 12, which is reserved for a specific coded list of items.
The 2026 form splits Box 14 in two. The IRS instructions for Forms W-2 and W-3 list state disability insurance taxes withheld as an example for Box 14a (Other), while Box 14b is reserved for Treasury Tipped Occupation Codes. The amount belongs in 14a, never in 14b.
Box 17 is the third wrong answer. Reporting CASDI there as state income tax withheld is a genuinely common error, and it creates a mismatch on the employee's California return.
The reason employees care is deductibility. According to the IRS instructions for Schedule A, mandatory contributions to the California Nonoccupational Disability Benefit Fund are deductible as state and local income taxes, subject to the federal cap on state and local tax (SALT) deductions, for an employee who itemizes. That is why you get a question about the Box 14 figure in March.
What you owe them is an accurate figure, correctly boxed, on the Form W-2. Whether it produces a tax benefit depends on their overall return, and that is a question for their preparer rather than for you.
CASDI vs the Other CA Taxes
California has four payroll taxes and employers routinely confuse them. Here they are together, which as far as I can tell no competing page bothers to do.
| Tax | What it is | Who pays | Rate and base |
|---|---|---|---|
| SDI / CASDI | Disability insurance and paid family leave | Employee only | 1.3% of SDI-subject wages in 2026. No cap |
| UI | Unemployment insurance | Employer only | Schedule F+ for 2026, ranging 1.5% to 6.2%, on the first $7,000 of wages |
| ETT | Employment training tax | Employer only | 0.1% on the first $7,000 of wages |
| PIT | California personal income tax withholding | Employee only | Per the state withholding tables and the employee's DE 4 |
| Workers' compensation | Work-related injury coverage | Employer only | Not a payroll tax. Insurance, priced by job class |
The critical distinction, and the one that produces spreadsheet errors: SDI and PIT come out of the employee, while UI and ETT come out of you. All four go to the EDD, which is why they get conflated.
Then there is workers' compensation, which sits in a different category entirely. It covers work-related injuries and you pay for it through an insurance policy. SDI covers non-work-related illness and injury, and the employee funds it.
The practical test is where the injury happened. An employee injured at work claims workers' comp; an employee injured skiing claims SDI. Confusing the two in a conversation with an injured employee is an unhelpful way to start.
What It Actually Buys
CASDI pays for two programs, Disability Insurance and Paid Family Leave. They are worth understanding, because your employees will ask and because they are decent programs.
| Program | Covers | Typical use |
|---|---|---|
| Disability Insurance | Non-work-related illness, injury, or pregnancy | An employee who cannot work for weeks after surgery or during a difficult pregnancy |
| Paid Family Leave | Caring for a seriously ill family member | An employee taking time to care for a parent after a stroke |
| Paid Family Leave | Bonding with a new child | New parents, following a birth, adoption, or foster placement |
| Paid Family Leave | A qualifying military deployment event | Less common, but covered |
Both programs pay partial wage replacement. According to the EDD, a Disability Insurance claim beginning on or after January 1, 2026 pays 70 to 90 percent of the wages the employee earned 5 to 18 months before the claim start date, capped at $1,765 a week for up to 52 weeks.
The employee claims directly from the EDD, not from you, so your role in a claim is minimal. You may be asked to confirm employment and wages, and that is largely it. You are not paying the benefit and you are not adjudicating it.
Leave is where this gets confused. SDI provides wage replacement, but it does not by itself provide job protection. That comes from separate laws, such as the rules on a leave of absence and FMLA, the federal Family and Medical Leave Act. An employee on SDI may or may not have a protected job to return to.
What the deduction buys is also the answer to an employee who resents it. It is not a tax in the sense of disappearing into a general fund. It is insurance, they are the beneficiary, and a great many of them will eventually claim against it.
If You Hire Outside California
CASDI applies to employees who work in California. Not to employees of a California company. The distinction matters enormously and it is the thing multi-state employers get wrong.
| Your situation | CASDI applies? | What you actually have to do |
|---|---|---|
| All employees work in California | Yes, to all of them | Withhold 1.3 percent of SDI-subject wages for each of them |
| You are based in California, employee works in Texas | No | Texas rules apply to that person. No CASDI, and no Texas equivalent either |
| You are based elsewhere, employee works in California | Yes | You must register with the EDD and withhold. Your own location is irrelevant |
| Employee splits time between states | It depends | Genuinely complicated. This is an accountant question, not a spreadsheet question |
| A few other states run similar programs | Not CASDI | Their own names, their own rates, their own agencies. Do not assume symmetry |
Getting It Wrong
The consequences differ depending on which part you got wrong, and one of them is worse than employers expect. The penalty amounts below are the EDD's own, from the filing schedule linked earlier.
| What went wrong | What happens |
|---|---|
| You withheld the wrong rate | Under-withheld amounts are still owed. You may end up covering them yourself |
| You applied a wage cap that no longer exists | Systematic under-withholding for every high earner, every period, until you find it |
| You paid the EDD late | A 15 percent penalty on the late amount, plus interest, running from the due date |
| You filed the quarterly wage report late | $20 for each unreported employee, plus interest, once it is more than 15 days past the EDD demand |
| You did not withhold at all | You may be liable for contributions you never collected. Recovering them from employees afterwards is difficult |
| You never registered with the EDD | Everything above, compounding, plus the registration you still have to do |
The fifth row is the one worth dwelling on. If you failed to withhold, the obligation does not disappear. It becomes yours, and clawing it back from employees months later is awkward at best and may not be permitted at all. A deduction you should have taken in March is not one you can simply take twice in September.
If the error ran the other way, meaning you over-withheld, the correction has its own mechanics and is closer to a retro pay adjustment than to a simple refund. Do not just hand the money back without checking how it should be recorded.
The practical instruction is the same as for any payroll error: self-correcting is always cheaper than being found. If you discover you have been under-withholding, fix the rate immediately and talk to your accountant about the accumulated shortfall, rather than hoping it goes unnoticed.
Common Mistakes
Six recurring errors, and the first two are the ones I would bet money on you having.
The rate and the cap are the same failure wearing two hats: configuring payroll from a source that is not the EDD. Vendor pages go stale, glossaries do not get updated, and the rate moved in 2024, 2025, and again in 2026. Whatever you do about the rest of this article, get the rate from the EDD every January.
This is the strongest practical argument for payroll automation in a California context: a system updates the rate in January without being reminded, and a spreadsheet contains whatever number somebody typed into it in 2024.
The multi-state one is the most expensive. A California hire made without registering with the EDD accumulates exposure silently, and the first notice you get is usually from the state rather than from your conscience. If you have hired remotely at all, check where those people actually sit.
Before your next payroll run, work through these five checks.
Frequently Asked Questions
What is CASDI?
CASDI is California State Disability Insurance, a mandatory payroll deduction that every California employer must withhold from employee wages and pay over to the state’s Employment Development Department. Employees fund it on their own, and the employer adds nothing. The money pays for two state programs. Disability Insurance replaces part of a worker’s pay while an illness or injury that did not happen on the job keeps them from working. Paid Family Leave does the same while they care for a seriously ill relative or bond with a new child. In 2026 the deduction is 1.3 percent of SDI-subject wages, meaning gross pay less any Section 125 cafeteria plan deductions such as health coverage or dependent care, and because there is no wage cap, it applies to every subject dollar an employee earns.
What does CASDI stand for?
California State Disability Insurance. You will also see it written as CA SDI, CA-SDI, or simply SDI. They all refer to the same program. On a pay stub it most often appears as CASDI-E, where the trailing E indicates the employee contribution, which is the only contribution there is. CASDI is the California-specific label; a handful of other states run similar employee-funded disability programs under their own names, but only California calls it CASDI. The program behind the name is run by the Employment Development Department and funds two benefits, Disability Insurance and Paid Family Leave, from the same deduction, which is 1.3 percent of SDI-subject wages in 2026 with no wage cap.
What is the CASDI meaning on my paycheck?
It is the California State Disability Insurance line on your employees’ pay stubs, usually labeled CASDI, CASDI-E, or CA SDI, and it is not optional. For 2026 you withhold 1.3 percent of each California employee’s SDI-subject wages, meaning gross pay less Section 125 cafeteria plan deductions such as health coverage or dependent care, with no wage cap, and you remit it to the Employment Development Department along with your state income tax withholding. You add nothing yourself, because there is no employer share: you collect the money and forward it. It funds the state Disability Insurance and Paid Family Leave programs, which your employees claim from the EDD directly if a non-work-related illness or injury keeps them from working, or if they need leave to care for a seriously ill family member or bond with a new child. That is the answer to give an employee who asks what the line means.
What is the CASDI rate for 2026?
1.3 percent of SDI-subject wages, with no wage cap. SDI-subject wages are gross pay less Section 125 cafeteria plan deductions such as health coverage or dependent care; a 401(k) deferral stays in the base. The rate is set annually by the Employment Development Department and it has risen steadily: 1.1 percent in 2024, 1.2 percent in 2025, and 1.3 percent in 2026. Critically, there is no taxable wage ceiling. Senate Bill 951 eliminated it effective January 1, 2024, so all wages are subject to SDI contributions with no maximum contribution amount. Many articles still online cite an old rate or an old wage cap. Those figures are wrong and using them will cause you to under-withhold.
Is there a wage cap on CASDI?
No, not since January 1, 2024. Senate Bill 951 eliminated the taxable wage ceiling, and the EDD confirms that all wages are now subject to SDI contributions. This means a high earner pays 1.3 percent on every dollar of SDI-subject wages all year long, where previously they would have stopped contributing once their year-to-date wages crossed the ceiling. The last year a cap applied was 2023, when the rate was 0.9 percent on the first $153,164 of wages, so the most any employee paid for the year was $1,378.48. If your payroll system still applies a cap, or if you have been told an employee will stop paying SDI partway through the year, that is a stale configuration and it is producing incorrect paychecks.
Who pays CASDI, the employer or the employee?
The employee pays all of it. CASDI comes entirely out of employee wages, and there is no matching employer share, which is rare among payroll taxes. What you must do as the employer is take the correct amount out of each paycheck, send it to the EDD on your required deposit schedule, include it on the quarterly returns, and total it on each W-2 at year end. In other words, you collect the money for the state rather than paying into it. That role does not shrink your legal exposure. If the deduction is never taken or never sent in, the liability lands on you, not on the employee.
Is CASDI mandatory?
Yes, for essentially all California employers with employees. The only lawful alternative is an EDD-approved Voluntary Plan, which is a private disability plan that must provide at least the same benefits as the state plan, must include at least one benefit that is better than the state plan, cannot cost employees more than the state rate, and must be approved by a majority of your employees and by the EDD. Voluntary Plans are uncommon among small businesses because they carry their own administrative and approval burden. For most employers, CASDI is simply mandatory. In practice that means withholding 1.3 percent of SDI-subject wages from every employee who works in California, with no wage cap and no employer share, and remitting it to the Employment Development Department on your assigned deposit schedule.
Is CASDI the same as SDI?
Yes. They are the same program and the terms are used interchangeably. SDI is the general program name, State Disability Insurance, and CASDI is the California-specific acronym you will see on a pay stub. The program funds both Disability Insurance and Paid Family Leave, which is why there is no separate PFL deduction on a California pay stub: a single SDI withholding covers both. The pay stub labels CASDI-E and CA SDI name that same deduction, withheld at 1.3 percent of SDI-subject wages in 2026 with no wage cap. If someone asks you the difference between CASDI and SDI, the answer is that there is none. The one different line you may meet is VPDI, which appears only when an employer runs an EDD-approved Voluntary Plan in place of the state program.
Where does CASDI appear on a W-2?
In Box 14, the catch-all W-2 box where an employer reports extra information to the employee. On the 2026 form that box has two parts, and CASDI belongs in Box 14a (Other), labeled CASDI or SDI withheld, with the full-year total beside it. Box 14b holds tipped occupation codes, so the amount never goes there. Box 12 is also wrong, because it takes only a fixed list of coded items. Box 17 is a common mistake: that box is for state income tax withheld, and CASDI does not belong there. Employees who itemize on their federal return may need the Box 14 amount, so expect the occasional question about it in the spring.
Do I withhold CASDI from employees outside California?
No. CASDI covers only people who work in California. Employees based in other states fall under their own state’s rules, and most states have no employee-funded disability deduction of this kind at all. A handful of states do run comparable programs, each under its own name and at its own rate. The deciding factor for a multi-state employer is where each employee actually does the work, not where your company is based. That cuts both ways: a California company does not take CASDI from someone working in Texas, and an out-of-state company that hires a single person working in California picks up a CASDI obligation it never had before.
What happens if I do not withhold CASDI correctly?
Penalties and interest, and the exposure is yours rather than the employee’s. The EDD charges 15 percent plus interest on a late deposit of SDI and state income tax withholding. A quarterly wage report still missing more than 15 days after the EDD demands it costs $20 for every employee left off it, again with interest. The heavier problem is failing to withhold at all: you can end up liable for a contribution you never collected, and going back to employees months later to recover it is difficult and sometimes not permitted. Fix the withholding the day you find the error rather than waiting for a notice.
Is CASDI tax deductible for the employee?
Potentially, on a federal return. The IRS instructions for Schedule A treat a mandatory contribution to the California Nonoccupational Disability Benefit Fund as a state and local income tax, so an employee who itemizes instead of taking the standard deduction can include it, within the overall cap on state and local tax (SALT) deductions. That is the reason the Box 14 number on their W-2 draws attention each spring. Whether claiming it lowers their tax bill depends on the rest of their return, which is for them and their tax preparer to work out. Your part is getting the Box 14 amount on the W-2 right, and nothing beyond that.
What benefits does CASDI actually pay for?
Two programs. Disability Insurance provides partial wage replacement to an employee who cannot work due to a non-work-related illness, injury, or pregnancy. Paid Family Leave provides partial wage replacement to an employee caring for a seriously ill family member, bonding with a new child, or dealing with a qualifying military deployment event. Both are administered by the EDD and both are funded by the same SDI deduction. Disability Insurance claims that begin on or after January 1, 2026 pay 70 to 90 percent of the wages earned 5 to 18 months before the claim start date, up to $1,765 a week, for as long as 52 weeks. The employee files with the EDD directly, so your part as the employer is small: confirming employment and wages when asked. Note the distinction from workers’ compensation, which covers work-related injuries and is a separate, employer-paid obligation entirely.