- Are Workers' Comp Indemnity Earnings Taxable?
- How to Calculate Actual Wages When You Pay Medical Insurance & Contribute to a 401(k)
- Income Tax on Company-Provided Cars
- Does Social Security Withholding Figure Into My Tax Return?
- How to: Box 7 on a W-2 on a Tax Return
- What Does It Mean That My W-2 Indicates I Didn't Pay Any Federal Taxes While in the Military?
SDI stands for state disability insurance, which pays a portion of your salary if you experience a non-work-related illness, injury, pregnancy or childbirth. Only a few states require that employers carry the insurance, and either you, your employer or both parties may pay the cost. If you contribute to the plan, your employer reports the amount in Box 14 of your annual W-2.
As of 2013, California, Hawaii, New Jersey, Rhode Island and New York require that employers provide state disability insurance. Some employers carry disability insurance even if the state does not mandate it. The procedure for calculating state disability benefits varies by state. For example, in New Jersey, weekly benefits are based on two-thirds of your average weekly salary, up to a maximum of $584 per week, as of 2013.
If your employer says you must contribute to the plan, the state limits the amount that your employer can deduct from your paychecks. For example, in New York, an employer calculates an employee’s premiums at one-half of 1 percent of her income, up to the maximum of 0.60 cents per week. In California, however, an employer may deduct SDI at 0.1 percent of an employee’s wages, up to $100,880 for the year.
Your employer puts your state disability insurance contributions in Box 14, which is labeled “Other,” of your W-2. If your employer paid all of your SDI, it includes those payments in your state taxable wages in Box 16 of your W-2.You would report the amounts paid by your employer as taxable income on your state tax return. Depending on the situation, the taxable wages reported on an employee’s W-2 might not mean that state disability insurance was deducted from those wages. This might happen, for example, if an employee works for a domestic or agricultural employer. The state might not require that those employers withhold taxes or disability insurance from an employee’s wages, unless both parties agree to it.
If your employer paid all of your SDI, it does not include the amount in Box 14 of your W-2. It simply includes the amount paid in your taxable wages and puts the total in Box 16. At tax time, if you are itemizing your deductions on your federal return, you may include your state disability insurance contributions and your state income tax paid. To claim the deduction, add your SDI payments to your state income tax paid and report the total on line 5 of Form 1040, Schedule A.
- Tax Brain: Form W-2
- Small Business Administration: Determine Your State Tax Obligations
- New Jersey Department of Labor and Workforce Development: Calculating Benefit Amounts - State Plan
- New York State Workers' Compensation Board: What are Disability Benefits?
- California Employment Development Department: Rates, Withholding Schedules, and Meals and Lodging Values
- California Employment Development Department: Information Sheet
- IRS.gov: 2013 Form W-2
- University of California, San Diego: Taxes: W-2 Statement FAQ
- IRS.gov: Itemized Deductions
- Jupiterimages/Brand X Pictures/Getty Images