How To Deduct California SDI From Federal Taxes

Written by J. Hirby and Fact Checked by The Law Dictionary Staff  

It does not make sense for the federal and state authorities to tax each others government programs. Thus, you may be able to deduct your California State Disability Insurance (SDI) from federal taxes if you use the long Federal 1040 form. This is how you do it.

"What are the Primary Benefits of California SDI?"

California SDI has two primary program benefits: 1) Disability Insurance and 2) Paid Family Leave (PFL). This is meant to supplement or replace some of the wages that workers are unable to earn due to a temporary incapacity. Disability Insurance is for a non-work related illness or injury. Paid Family Leave is for when a family member takes time off from work to care for a child, spouse or parent.

The State of California automatically withholds this mandatory tax from workers' paychecks. SDI is meant as a "partial wage-replacment insurance plan" for California workers. This employee payroll deduction can be claimed on your 1040 Federal Individual Income Tax Return Form.

"Itemized Deductions Include California SDI"

You should use the long 1040 tax from because it allows you to itemize your deductions. Collect your "W-2 Wage and Tax Statement Form" to determine how much you paid in California SDI. The W-2 Form has Box 14 marked as "Other" where your California State Disability Insurance deduction totals should be listed.

Next, you should take out "Schedule A Itemized Deductions" for your Federal 1040 Form and itemize the California SDI deductions. Transfer the figure from Box 14 of your W-2 over to Schedule A, Box 5a in the section marked "Income Taxes You Paid." You will need to check Box 5a identifying the figure as "State Income" taxes.

The California State Disability Insurance taxes qualify as State Taxes because they are taken out of your paycheck. Continue to fill out the Itemized Deductions Form, all of the taxes will be added together and totaled on Line 9 of Schedule A.

As you continue down Schedule A, you will eventually total your Itemized Deductions. Compare your total amount for Itemized Deductions from Schedule A to your Standard Deduction listed in the instructions of the 1040 Federal Individual Tax Form near Line 40. You will enter whichever is greater - Itemized Deductions or Standard Deduction - on Federal Form 1040 Line 40.

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