Is California Disability Payment Subject to Federal Income Taxes?

Is California Disability Payment Subject to Federal Income Taxes?
Paid Family Leave benefits are subject to federal taxes.

Only Certain SDI Benefits Subject to Tax

SDI benefits are considered unemployment compensation if a worker's disability was the only reason he was disqualified for unemployment insurance. For example, if a worker is already receiving unemployment and then becomes disabled, California will pay him SDI benefits instead of unemployment insurance. As a result, the SDI payments are taxable because the IRS considers the payments a substitute for unemployment. In these cases, California issues the worker a 1099-G form listing the total amount of taxable benefits and also forwards a copy to the IRS. Workers who receive Paid Family Leave benefits under the SDI program also receive a 1099-G form because these payments are subject to federal tax as well.