EDD SDI tax filing confusion - report disability benefits on 2025 taxes?

California SDI benefits are NOT taxable on your federal return if you paid into the system through payroll deductions (which most CA employees do). The IRS doesn't consider it taxable income because you already paid tax on the money that went into SDI. You don't need to report it on your federal taxes. However, if your employer paid for your disability insurance as a benefit without you contributing, then it would be taxable. You can verify this on the EDD website or in IRS Publication 525.

I got SDI last year too and my tax guy said dont report it!! But my sisters accountant told her 2 report it then subtract it somewhere else on the form?? idk tax stuff is so confusing lol

The correct answer depends on who paid for your SDI coverage. If you paid the premiums (through the standard CA payroll deduction that most employees have), then the benefits are NOT taxable on your federal return. If your employer paid the premiums, then the benefits ARE taxable. For California state tax purposes, SDI benefits are not taxable regardless of who paid the premiums. Given that you mentioned normal payroll deductions, your SDI benefits should not be taxable on either your federal or state returns. You don't need to report them at all. If you're still concerned, you can call EDD directly to confirm, though getting through can be challenging with their high call volumes.

Thanks everyone for the responses. I'm still a bit confused about my tax software asking specifically about disability income. Should I just answer "no" to that question since the SDI doesn't need to be reported? Or do I need to say "yes" but then indicate somewhere that it's not taxable?

i went thru the same thing after my back surgery last year! what helped me was calling my HR department at work. they knew exactly how it worked with taxes and our specific payroll setup. might be worth asking your company's HR or payroll dept if you're still not sure after all these answers.

Just throwing in my experience - I was on SDI for 4 months in 2023 and didn't report it on my taxes. I actually asked my tax preparer specifically about this and she confirmed that since I paid into SDI through normal payroll deductions (the usual CA state disability insurance deduction on your paystub), the benefits are not federally taxable. No issues with my return.

Here's an easy way to know if your SDI was the non-taxable kind: Check your most recent paystub from before you went on leave. Look for a deduction labeled "CA SDI" or "CASDI" or sometimes just "SDI". If you see that deduction, then you were paying into the state plan yourself, and your benefits are NOT federally taxable. If you had a different type of disability insurance (private, employer-provided, etc.), then different tax rules might apply. But standard California State Disability Insurance benefits are not taxable when the premiums were paid by you with after-tax dollars.

I'm new here but just went through something similar! I was on SDI for about 6 weeks last year after a surgery and had the same confusion about taxes. What really helped me was looking at my final SDI payment notice from EDD - it actually has a note at the bottom that says something like "If you paid SDI contributions through payroll deductions, these benefits are generally not taxable for federal purposes." I ended up not reporting mine on my federal return and had no issues. For the tax software question about disability income, I selected "no" since it was asking about taxable disability income specifically. Just make sure you keep all your SDI paperwork in case you ever need to prove it wasn't taxable income!