How to Deduct SDI on Schedule A

Some states require employers to deduct state disability fund contributions from workers’ pay. The states that mandate the state disability insurance (SDI) deduction include California, New Jersey and New York. However, Rhode Island and Washington also require deductions from employee pay for similar state disability funds. If you work in any of these states, you may not waive the requirement to have the contributions withheld from your pay. Because the deduction is mandatory, the IRS allows you to deduct the amount you contribute to the disability fund as an itemized deduction on Schedule A.

Look at your W-2 forms. SDI that was deducted from your pay is listed in Box 14. Your employer must label the amount listed in Box 14 as SDI, or a similar notation so you may properly identify the deduction reported on the W-2.

Add the amount in Box 14 and the amount of state income tax withheld shown in Box 17 and the amount of any local taxes withheld, shown in Box 19. The sum is the amount you may deduct for SDI and state income taxes paid on Schedule A.

Report the combined state SDI, income tax and local income tax you paid during the year on line 5 of Schedule A.