For 2026 California's State Disability Insurance (SDI) employee withholding rate increases to 1.3%, up from 1.2% in 2025, per the EDD (form DE 3395). Since January 1, 2024 there is no taxable wage limit, so the 1.3% applies to 100% of each employee's wages with no annual maximum withholding. SDI is withheld from employee pay but remitted by the employer alongside UI, ETT and PIT.
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California SDI payroll withholding rises to 1.3% in 2026, still no wage cap
Why this matters for founders
Any California founder running payroll must update their 2026 SDI rate to 1.3% and confirm it applies to all wages, not just a capped amount, high earners now generate meaningfully more withholding. Update payroll software or your provider's settings before the first January 2026 run, and factor the uncapped rate into offer-letter math when hiring senior staff.
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