Can I Deduct SDI Taxes That Were Withheld From My Rhode Island Paycheck?

Rhode Island developed Temporary Disability Insurance (TDI) program, the first state disability insurance (SDI) program, in 1942. New York, New Jersey, California and Hawaii are the only other states with SDI programs. TDI provides weekly payments to eligible Rhode Island employees who become injured from a nonwork-related accident. Mandatory contributions to TDI appear on employee's paycheck stubs and annual tax forms.

Rhode Island employees fund the Temporary Disability Insurance program through payroll-deducted payments. For 2022, employees aged 16 or older contribute 1.1 percent of the first $81,500 in earnings. Rhode Island employers withhold payments from each paycheck and send quarterly payments to the Employer Tax Unit. Employers report the total amount paid each year to employees in box 14 of IRS Form W-2, Wage and Tax Statement.

Employees pay TDI with pretax dollars; therefore, the amount paid is not subject to federal or Rhode Island tax. Taxpayers cannot deduct payments from their Rhode Island state income tax and should not include this amount on Form RI-1040 line 18A, Rhode Island Tax Withheld. The IRS does recognize the payments as a mandatory contribution and allows taxpayers to deduct this amount when filing federal tax return.

Rhode Island employees fund the Temporary Disability Insurance program through payroll-deducted payments.

Taxpayers report the total withheld for TDI to the IRS on Schedule A, often called the long form. Employees combine the amount from W-2 box 14 with all other state and local taxes paid, any estimated taxes submitted to state or local government and any other deductible mandatory payments. Taxpayers enter this total on Schedule A, line 5, State and Local Income Taxes. This amount, added to other deductible expenses, is entered on Form 1040, line 40. Taxpayers should select the larger of this amount or the standard deduction.

Employees who have been injured can apply for benefits from the temporary disability pool. Once a qualified healthcare provider determines eligibility and the waiting period week has passed, injured employees will receive weekly TDI benefits. Benefits continue for the length of disability, as determined by a medical professional, up to a maximum of 30 weeks. These benefit payments are not taxable and do not need to be reported when filing federal and Rhode Island taxes.