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 hired your first California employee recently, there is a reasonable chance you are asking the same question.
Here is the thing that makes this page worth writing rather than just another glossary entry. A large number of the pages currently explaining CASDI are wrong. They cite a rate of 1.1 or 1.2 percent. They mention a wage ceiling, or a maximum contribution, or a figure like $1,601.60. Those things were true once. They are not true now, and an employer configuring payroll from a stale page will under-withhold every single check.
This is 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. 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: this is state tax law, the rate changes annually, and I am not a tax professional. Verify against the 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 things follow from that definition that are worth stating plainly, because they are the source of most confusion.
CASDI and SDI are the same thing. SDI is the program name; CASDI is the California acronym you see on a stub. There is no difference and no separate deduction. There is no separate Paid Family Leave deduction either, because PFL is funded from the same pot. And you pay none of it, which makes CASDI genuinely unusual among payroll taxes.
The 2026 Rate
This is the section 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 single most consequential change and the one that produces the most employee questions. Before 2024, a high earner stopped contributing partway through the year once their wages crossed the ceiling, and their take-home pay would visibly increase. That no longer happens. Someone earning $400,000 now pays 1.3 percent on all of it, every pay period, all year.
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 all wages | 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, and mixing them up is a common source of error in a payroll spreadsheet.
The employer-funded side of the picture, meaning what you actually owe on top of wages, is covered in statutory benefits.
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
Six obligations, and the arithmetic is the easiest one. There is one lawful way out of CASDI, and it is not a loophole: an EDD-approved Voluntary Plan, a private disability plan that must be at least as good as the state plan, must be better in at least one respect, cannot cost employees more, and must be approved by both your employees and the EDD. Almost no small business does 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.
Note that your CASDI deposit schedule is a separate thing from your pay schedule. The distinction between how often you pay people and how often you hand money to a tax authority catches out nearly every first-time employer, and it is covered in the payroll guide.
A Worked Example
The calculation is genuinely trivial. Here it is anyway, because the last row is what people actually need to see.
One configuration detail that catches people: withhold on gross wages, not on wages after pre-tax deductions. 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. That distinction is covered in gross pay versus net pay, and it is one of the quieter ways a hand-built payroll goes wrong.
On the Pay Stub
Your employees will ask about this line, so here is what it looks like 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 to CASDI, the suffix is somewhat vestigial, 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, labeled, showing the total withheld for the year.
Box 14 is the box for other information the employer wants to report, and it is where state disability contributions belong. It does not go in Box 12, which is for a specific coded list of items, and it is not reported as state income tax withheld in Box 17, which is a genuinely common error and one that creates a mismatch on the employee's state return.
The reason employees care is that CASDI may be deductible on a federal return for those who itemize, which is why you will occasionally get a question about it in March. What you owe them is an accurate figure, correctly boxed, on the Form W-2. Whether it produces a tax benefit is a question for their preparer.
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 all 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. UI and ETT come out of you. All four go to the EDD, which is why they get conflated, but they sit on opposite sides of the paycheck.
Note also that workers' compensation is 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. An employee injured at work claims workers' comp; an employee injured skiing claims SDI. Confusing these two in a conversation with an injured employee is an unhelpful way to start.
What It Actually Buys
Worth knowing, because your employees will ask and because it is genuinely a decent program.
| 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, capped at a maximum weekly benefit which for 2026 is $1,765. The employee claims directly from the EDD, not from you, which is a useful thing to know: 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.
Worth knowing how this interacts with leave: SDI provides wage replacement, but it does not by itself provide job protection. That comes from separate laws, and the whole picture of who is entitled to what is in leave of absence and FMLA. An employee on SDI may or may not have a protected job to return to, and those are different questions with different answers.
This is also the answer to an employee who resents the deduction. 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 from everyone, no exceptions |
| 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.
| 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 penalty on the late amount, plus interest. It applies from the due date |
| You filed the quarterly report late | A separate penalty, assessed per unreported employee, plus interest |
| 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, depending on the amounts and the circumstances, may not be permitted at all. A deduction you should have taken in March is not something 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 simply 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 has changed in each of the last three years. Whatever you do about the rest of this article, take the number from the EDD, in January, every year.
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 recently, check where those people actually sit.
Frequently Asked Questions
What is CASDI?
CASDI stands for California State Disability Insurance. It is a mandatory, employee-funded payroll deduction that every California employer must withhold from employee wages and remit to the state's Employment Development Department. It funds two programs: Disability Insurance, which partially replaces wages when someone cannot work due to a non-work-related illness or injury, and Paid Family Leave, which covers caring for a seriously ill family member or bonding with a new child. For 2026 the rate is 1.3 percent of gross wages, with no wage cap, meaning every dollar an employee earns is subject to it.
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.
What is the CASDI meaning on my paycheck?
It is the California State Disability Insurance deduction, and it is not optional. The line on your stub, usually labeled CASDI, CASDI-E, or CA SDI, is 1.3 percent of your gross pay for 2026, withheld by your employer and sent to the state. It funds short-term disability benefits and paid family leave, and it is what you would claim against if you became unable to work or needed to care for a family member. Your employer does not keep any of it and does not contribute to it; they simply collect and forward it.
What is the CASDI rate for 2026?
1.3 percent of gross wages, with no wage cap. 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 all year long, where previously they would have stopped contributing once their year-to-date wages crossed the ceiling. 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 is funded entirely by employee contributions and there is no employer share, which makes it unusual among payroll taxes. What the employer must do is withhold it correctly from every paycheck, deposit it with the EDD on the required schedule, report it on quarterly returns, and show it on the W-2. You are a collection agent rather than a contributor. That distinction does not reduce your legal exposure: failing to withhold or remit is your problem, not the employee's.
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.
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. If someone asks you the difference between CASDI and SDI, the answer is that there is none.
Where does CASDI appear on a W-2?
In Box 14, which is the box for other information an employer wants to report. It is typically labeled CASDI or SDI followed by the amount withheld for the year. It does not belong in Box 12, and it is not reported as state income tax withheld in Box 17, which is a genuinely common error. Employees sometimes need the Box 14 figure when they itemize deductions on a federal return, which is why they will occasionally ask you about it in the spring.
Do I withhold CASDI from employees outside California?
No. CASDI applies only to employees who work in California. If you employ people in other states, they are subject to their own state's rules, and most states have no equivalent employee-funded disability deduction at all. A handful of states do run similar programs under their own names and their own rates. The key point for a multi-state employer is that withholding follows the employee's work location rather than your company's address, so one remote hire in California creates a CASDI obligation you did not previously have.
What happens if I do not withhold CASDI correctly?
Penalties and interest, and the exposure is yours rather than the employee's. Late payroll tax payments to the EDD carry a penalty plus interest, and failure to file the required quarterly wage report on time carries a separate penalty assessed per unreported employee. More seriously, if you failed to withhold at all, you may find yourself liable for the contribution you never collected, and recovering it from employees months later is difficult and in some circumstances not permitted. Correct the withholding as soon as you find the error rather than waiting.
Is CASDI tax deductible for the employee?
Potentially, on a federal return. CASDI contributions may be deductible as state and local taxes for employees who itemize deductions rather than taking the standard deduction, which is why the Box 14 figure on the W-2 matters to them in the spring. Whether it actually produces a benefit depends on the employee's overall tax situation, and this is a question for their tax preparer rather than for you. What you owe them is an accurate W-2 with the correct Box 14 amount, 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. Note the distinction from workers' compensation, which covers work-related injuries and is a separate, employer-paid obligation entirely.