Is EDD SDI taxable income? Federal vs. State tax differences explained

I think its taxable for both... at least that's what my sister told me when she was on disability last year? Better save some just incase

Actually, State Disability Insurance (SDI) benefits in California are NOT taxable for state income tax purposes, but they ARE reportable and taxable for federal income tax purposes. This is different from unemployment benefits. You should receive a Form 1099-G from EDD at the beginning of 2026 showing the total SDI benefits you received in 2025. You'll need to report this amount on your federal tax return. You can choose to have federal taxes withheld from your SDI payments by submitting a Voluntary Federal Income Tax Withholding request through your SDI Online account or by submitting a DE 4P form.

Wait, I'm confused...so if I'm getting SDI for pregnancy disability leave, do I need to pay taxes on it or not? What about when I transition to Paid Family Leave after the baby? Are those taxed differently?

This is why the californai tax system is so CONFUSING!! Why can't they just make it simple like other states? I was on disabilty back in 2023 for my knee surgery and didn't know about the federal tax thing. Had to set up a payment plan with the IRS cause i couldn't pay what I owed all at once....

Just to clarify a few points about SDI and taxes: 1. SDI benefits are NOT taxable for California state income tax 2. SDI benefits ARE taxable for federal income tax 3. You can request federal tax withholding by submitting a DE 4P form 4. If you don't have taxes withheld, consider setting aside about 10-15% of your benefits for federal taxes 5. You'll receive a 1099-G form (not a W-2) reporting your benefits to the IRS This applies to both regular disability and pregnancy disability. The same rules apply to Paid Family Leave (PFL) benefits.

i had sdi twice, once in 2022 and again last year for different things. both times i had NO IDEA about the federal tax thing until i filed taxes!!! why doesn't edd make this more clear when you apply???

When I was on disability last year for my shoulder surgery, I initially thought it wasn't taxed at all. Then I was told by my neighbor it was fully taxable like a regular paycheck. Then my uncle said it wasn't taxable at all because it's a benefit not income. So confusing! Glad to see the correct info here - federal yes, state no. Wish I had known this earlier!

Thanks everyone for the detailed responses! This is exactly what I needed to know. I had no idea about the federal vs state tax difference. I'm definitely going to submit that DE 4P form to have federal taxes withheld - I'd rather have smaller payments now than get hit with a big tax bill next year like some of you experienced. Really appreciate this community for helping newcomers navigate all these confusing EDD rules!

As someone who just went through this exact situation last month, I can confirm what others have said - SDI is NOT taxable for California state taxes but IS taxable for federal taxes. I learned this the hard way when I got my first payment and panicked about taxes! I ended up calling EDD (after waiting forever on hold) and they walked me through submitting the DE 4P form to have 10% federal taxes withheld from my payments. You can actually do this online through your SDI Online account under "Manage Claim" - no need to mail anything in. One thing I wish someone had told me earlier: even though it's taxable federally, SDI benefits are generally lower than your regular income, so you might end up in a lower tax bracket anyway. But definitely better to be safe and have some taxes withheld or set aside money like others suggested. Hope your back heals up soon!

This thread has been incredibly helpful! I'm currently on SDI for a work-related injury and had been stressing about the tax implications. Like many others here, I initially thought disability benefits weren't taxable at all. It's frustrating that EDD doesn't make this federal vs state tax difference more prominent when you first apply - would save a lot of people from getting hit with unexpected tax bills! I'm going to follow the advice here and set up federal tax withholding through my online account. Thanks to everyone who shared their experiences, especially those who learned the hard way. This community is a lifesaver for navigating all these confusing rules!

As someone who just started receiving SDI benefits this month for a workplace back injury, this thread has been absolutely invaluable! I had no clue about the federal vs state tax differences and was starting to panic about whether I needed to set money aside. The fact that so many people get blindsided by the federal tax requirement really shows how poorly EDD communicates this important information during the application process. I'm definitely going to log into my SDI Online account today and submit that DE 4P form for federal tax withholding - would much rather have smaller payments now than deal with a huge tax bill next April. Thank you to everyone who shared their experiences, especially those who learned the hard way. This community is such a great resource for navigating all these confusing disability benefit rules!

Just want to echo what everyone else is saying here - this thread has been SO helpful! I'm about to start my SDI claim for a knee injury from a slip at work and honestly had no idea about any of the tax stuff. Reading through everyone's experiences, it seems like the majority of people get caught off guard by the federal tax requirement. Really appreciate all the detailed explanations, especially about being able to submit the DE 4P form online through the SDI portal - that's going to save me a lot of hassle. Definitely planning to set up federal withholding from the start rather than risk getting hit with a big bill at tax time like some of you experienced. Thanks to this community for being such an amazing resource for newcomers navigating the EDD system!

This thread is incredibly helpful! I'm brand new to the community and just filed my first SDI claim this week for a rotator cuff injury. Like so many others here, I was completely clueless about the tax situation - I actually assumed disability benefits wouldn't be taxable at all! Reading through everyone's experiences has been such an eye-opener. It's really frustrating that EDD doesn't make the federal vs state tax difference more clear during the application process. Seems like almost everyone gets blindsided by this! I'm definitely going to follow the advice here and submit that DE 4P form through my SDI Online account to have federal taxes withheld. Much better to get smaller payments now than deal with a surprise tax bill later. Thank you to everyone who shared their hard-learned lessons - this community is amazing for helping newcomers navigate all these confusing rules!

I'm new to this community and currently waiting for my SDI claim to be approved for a work injury. This whole discussion has been incredibly enlightening! I had no idea there was a difference between federal and state tax treatment for disability benefits. Reading through everyone's experiences, it seems like the vast majority of people get caught off guard by the federal tax requirement - which is really concerning given how common SDI claims are. I'm definitely going to bookmark this thread and make sure to submit that DE 4P form as soon as my claim is approved. It's frustrating that such important tax information isn't more prominently displayed during the application process. Thank you to everyone who shared their experiences, both good and bad - it's going to save me and other newcomers from some nasty tax surprises! This community is such a valuable resource for navigating the complexities of the EDD system.

Just joined this community and this thread is exactly what I needed! I'm currently going through the SDI application process for a wrist injury from my job and had absolutely no clue about the tax situation. Like everyone else here, I assumed disability benefits wouldn't be taxable at all - shows how much I knew! Reading through all these experiences has been such a wake-up call. It's really concerning how many people get blindsided by the federal tax requirement. I'm definitely going to set up that federal tax withholding through the DE 4P form as soon as my claim is approved. Better to have slightly smaller payments than get hit with a huge tax bill next year! Thank you to everyone who shared their stories - this community is an amazing resource for newcomers trying to navigate the EDD maze. Really appreciate all the detailed advice and explanations!

Just joined this community and wow, this thread is exactly what I needed to see! I'm about to start my SDI claim for a herniated disc from a construction accident and honestly had no idea about any of the tax implications. Like so many others here, I just assumed disability benefits wouldn't be taxable at all - clearly I was wrong! Reading through everyone's experiences has been both enlightening and a bit scary seeing how many people got hit with unexpected tax bills. I'm definitely going to submit that DE 4P form for federal tax withholding as soon as my claim is approved - seems like that's the smart move based on all the advice here. It's really frustrating that EDD doesn't make this federal vs state tax difference more obvious during the application process. Thank you to everyone who shared their stories, especially those who learned the hard way. This community is such an invaluable resource for newcomers trying to figure out the EDD system!

As a newcomer to this community and SDI benefits, I can't thank everyone enough for this incredibly detailed discussion! I'm currently in the process of filing my first SDI claim for a workplace back injury and was completely lost about the tax implications. Like so many others here, I naively assumed disability benefits wouldn't be taxable at all. Reading through everyone's experiences - especially those who got blindsided by federal tax bills - has been such a wake-up call. It's honestly shocking how EDD doesn't make the federal vs state tax difference more prominent during the application process. I'm definitely going to submit that DE 4P form for federal tax withholding as soon as my claim is approved. The advice about setting up withholding from day one rather than risking a surprise tax bill seems like the smart approach based on all the stories shared here. This community is such an amazing resource for newcomers trying to navigate the complexities of the EDD system. Thank you to everyone who took the time to share their hard-learned lessons!

Just joined this community today and this thread has been absolutely invaluable! I'm in the middle of filing my first SDI claim for a shoulder injury from a workplace accident and had zero clue about the tax situation. Like literally everyone else here, I assumed disability benefits weren't taxable at all - clearly I had a lot to learn! Reading through all these experiences has been both educational and slightly terrifying seeing how many people got hit with unexpected federal tax bills. I'm definitely going to submit that DE 4P form for federal tax withholding the moment my claim gets approved - seems like that's the consensus move to avoid any nasty surprises come tax season. It's really unfortunate that EDD doesn't make this federal vs state tax distinction more clear upfront during the application process. Thank you to everyone who shared their stories, especially those who learned the hard way and are helping the rest of us newcomers avoid the same mistakes. This community is such a goldmine of practical advice for navigating the EDD system!