All California workers will have a little more money withheld from their paychecks starting in January 2025 because of a small tax increase quietly approved by state officials to provide more money to the state’s disability insurance program.
A spokesperson for California’s Employment Development Department, which administers and oversees the program, confirmed the SDI rate will increase from 1.1% to 1.2% in 2025. That means a couple or individual with $100,000 in taxable annual wages will have $100 more total withheld from their pay this upcoming year, or about $8 a month because of the tax increase, for example.
“The State Disability Insurance program is funded by workers. In 2025, the amount of benefits an eligible worker can receive will be going up to better support working families so Californians can take time off work to recover from injury or illness or care for a loved one,” said Employment Development Department Deputy Director of Public Affairs Loree Levy in a written statement.
State law allows the EDD and its director, Nancy Farias, to raise the rate based on a complicated formula by small amounts. A spokesperson for the department did not say when exactly the decision was made.
EDD officials at first on Thursday said the increase was associated with a state law that boosts disability and paid family leave benefits, which was approved by the state legislature in 2022 under SB 951.
Greg Lawson, the Chief of the EDD’s Media Services section clarified in an email on Friday morning that the law has no impact on the 2025 increase. Under that law, starting Jan. 1, 2025, workers who make less than $63,000 a year will get 90% of their pay replaced for disability insurance and paid family leave benefits. Higher earners will get 70%. Before the legislation took effect, the rates were 60% for higher-income workers and 70% for lower-income workers, Levy noted. She said this will help make the programs more accessible to Californians who care for an ill family member, assist a military family member or bond with a new child.
And while the EDD said Friday the law has no impact on the rate increase immediately, the State Senate’s most recent analysis of SB 951 shows it will starting in 2027. The EDD said in the analysis that between 2027 and 2030, workers will contribute an extra .1% to .2% per year.
