There are many questions regarding California tax returns. The Voluntary Plan for Disability Insurance (VDPI) is a common area of concern. Let’s take a look at the VDPI and see if it can be deducted from your tax return’s Schedule A.
VPDI is an expense that employees must pay, despite its name. Either the state-funded disability insurance plan or the plan the employer offers through a private, self-insured disability plan is mandatory for employees. The VPDI expense is for those who provide disability plans. This amount is about 1% of employee wages.
Employers must contribute to VPDI and SDI to ensure that employees receive compensation if they have to take personal or family leave. Two benefits are available to workers covered by SDI: Disability Insurance (DI), and Paid Family Leaves (PFL). These funds offer financial support to workers who are unable to earn the typical wage due either to an injury on the job, sickness leave, or maternity leave.
VPDI contributions generally are not tax-deductible on your federal tax returns. You can however take credit for certain individuals if you meet these conditions:
- Two or more California employers were yours
- In 2019, you earned more than $118.371 in wages
- Your W-2 will show the amounts of SDI or VPDI.
VPDI benefits and/or SDI benefits generally are not subject to tax by either the IRS or the state of California. They may be taxed in the following situations: SDI benefits are used in lieu of unemployment compensation, and for a person not eligible for Unemployment insurance (UI) benefits because of their disability. A Form 1099-G will inform an employee if there is taxable income. Therefore, an employee who does not receive a Form 1099-G can assume that they don’t owe tax on SDI income received.
VPDI can be complicated for small business owners and employees. When it comes to employee compensation and taxes, it is best to consult a tax professional.
This article was written by Alla Tenina. Alla is one of the best tax attorneys in Los Angeles California, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.