In California, if you are an officer and the sole shareholder of a corporation (or the only shareholders are you and your spouse), you may elect to stop California State Disability Insurance (SDI) withholding from your wages by filing an exclusion election with the California Employment Development Department (EDD).
SDI Withholding Update
Effective January 1, 2024, California eliminated the SDI taxable wage limit and maximum withholding amount. This means all wages are subject to SDI withholding. The current SDI rate for 2026 is 1.3%.
- Example: If your wages are $500,000, SDI withholding would normally be $6,500. By electing the exclusion, a sole shareholder/officer could save this amount.
How to Elect the SDI Exemption
- To make the election, file Form DE 459 (Sole Shareholder/Corporate Officer Exclusion Statement) with the CA EDD.
- The election becomes effective the first day of the calendar quarter in which it is filed.
Important Considerations
- Electing exclusion means you will not be eligible for state disability benefits, including Paid Family Leave (PFL).
- Consider the value of potential benefits and whether you have private disability insurance in place before making the election.
- If your spouse is also a shareholder and officer, either or both may file for the exclusion. The spouse must be a legally appointed officer to qualify.
- Notify your payroll administrator so SDI withholding can be correctly removed for the excluded officer(s).
- Other payroll taxes, including state and federal unemployment taxes, remain unaffected by the election.
For more information or assistance with this election, contact us here or call (949) 910‑2727.