Is EDD SDI taxable income? Federal vs. State tax differences explained
Hey everyone, I just received my first SDI payment after being out with a herniated disc (thanks construction job 😩). I'm trying to budget for the next few months and realized I have no idea about the tax situation with disability benefits. Do I need to set aside money for taxes? Is SDI taxable for California state taxes AND federal taxes? I know unemployment is only taxed federally but not sure if SDI follows the same rules. Anyone who's been through this before who can clarify would be super helpful!
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Sofia Perez
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
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Dylan Cooper
•Thanks for the response! Did your sister end up owing a lot at tax time? I'm wondering how much I should be setting aside if it is taxable.
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Dmitry Smirnov
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.
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ElectricDreamer
•THANK YOU FOR THIS!! i was on state disability for 3 months last year and had NO IDEA about this difference. ended up owing the irs like $1200 at tax time bc i didnt set anything aside!! ðŸ˜
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Ava Johnson
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?
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Miguel Diaz
•Both SDI and PFL are handled the same way tax-wise. They are exempt from California state taxes but subject to federal taxes. So for both programs: 1. You don't pay California state taxes on the benefits 2. You do pay federal taxes on the benefits 3. You can request federal tax withholding on either type of benefit Your 1099-G from EDD will include both types of benefits if you received them in the same tax year.
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Zainab Ahmed
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....
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Connor Byrne
•I feel your pain! When I was trying to get through to EDD about this exact tax issue last year, I was on hold for 3+ hours multiple days in a row. Finally found Claimyr (claimyr.com) which got me connected to an EDD rep in about 7 minutes. They have a demo video showing how it works: https://youtu.be/1X-mEsLtbmQ?si=1hcSq3KFtCr4oAmd The EDD rep confirmed that while they don't withhold federal taxes automatically, you can request it. Saved me from the same tax surprise you got hit with!
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Miguel Diaz
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.
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Dylan Cooper
•This is incredibly helpful, thank you! I think I'll go ahead and submit that DE 4P form to have the federal taxes withheld. Better to get slightly smaller payments now than a big tax bill later. Do you know if I can do this through my SDI Online account or do I need to mail in a form?
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ElectricDreamer
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???
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Sofia Perez
•I know right?? They should put it in big bold letters somewhere! My friend thought disability wasn't taxed at all and ended up with a huge tax bill
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Yara Abboud
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!
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Dylan Cooper
•It really is confusing! I'm glad I asked here instead of just assuming. Sounds like a lot of people get surprised at tax time.
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Chloe Martin
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!
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