How to Report California State Disability Payments on Taxes

Paid family leave benefits are always subject to federal taxes.
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If you live in California and receive State Disability Insurance (SDI) payments, you may be wondering, "Is state disability taxable in CA?" According to the state of California's Employment Development Department, the short answer is "no," but there are some exceptions. It all depends on whether or not you are also receiving unemployment benefits. This requirement follows the rules set by the state's Employment Development Department (EDD), so you may very well have to report the payments you have received.

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Is State Disability Taxable in CA?

Per the California EDD, individuals who leave work due to a disability and receive disability payments do not have to report these for tax purposes. But, and this is an important exception, if you are getting unemployment benefits and become injured or ill and start receiving disability benefits, those benefits now serve as a replacement for unemployment payments. You cannot receive both and not report the disability payments. This legal requirement is based on Federal Tax Regulation Section 1.85-1, which states that disability benefits are a substitute for unemployment benefits.

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Does EDD send 1099 for disability? Yes, they do. These specific disability 1099s, known as 1099-G forms, are provided to all claimants and the IRS. However, you'll only get a 1099-G if all or part of your State Disability Insurance benefits are taxable. If you don't get yours by the middle of February or are unsure if you should have one, contact EDD by calling 800-795-0193.

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Consider also:Are Disability Checks Subject to Federal & State Taxes?

More About CA State Taxes

Is paid family leave taxable in California, and how is it defined? The experts at Lincoln Financial explain that in the state, paid family leave (PFL) provides monetary benefits to eligible employees who must take off time. The reasons for this time off include caring for seriously ill family members, bonding with a new child or taking part in any such qualifying event due to a family member's military deployment. Family members include spouses, registered domestic partners, children, parents, parents-in-law, grandparents and grandchildren.

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These benefits are not taxable in California state but are subject to the federal rules of reporting income and paying taxes. These federal rules and regulations mean you must pay federal income tax on PFL benefits. However, if you receive these, you will be getting a 1099-G tax from the state. These have to be reported on your W-2, and the same goes for maternity leave SDI payments.

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Consider also:How to Transfer SSI Disability Benefits to Another State

Filling Out Your Tax Form

If you are sent a 1099-G for income that you did not receive, check with the CA Department of State Revenue's website to see if they have any information that can help point you in the right direction. Otherwise, contact the issuer (EDD), explain the discrepancy and request a corrected form. If you have to file your taxes before you rectify the problem, report only the income you actually received.

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Sometimes mistakes are made, and the amount you received for SDI differs from what the 1099-G shows. Any sort of difference like this one is a reason to contact the EDD. As a word of advice, it makes a lot of sense to save all of the receipts and deposit information while you are getting the benefits. These receipts and other information can serve as proof of all the money you received.

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If your California SDI benefits are taxable, you'll get the 1099-G and need to include the information on your federal 1040 tax form. Enter the amount shown on line 19. If you're using a 1040EZ, enter this on line 3; if it's a 1040A, the amount has to go on line 13. These benefits then get added into the rest of your income claimed, with the total entered in the box marked "taxable income."

Consider also:How to Apply for Long-Term Disability in California

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