An employee earning $75,000 annually in California has what amount subject to State Disability Insurance (SDI) withholding if the wage base is $153,164?
Correct Answer
D) $75,000
Since the employee's annual wages ($75,000) are below the SDI wage base limit ($153,164), the entire $75,000 is subject to SDI withholding.
Why This Is the Correct Answer
SDI withholding applies to all wages up to the annual wage base limit. Since the employee's $75,000 salary is entirely below the $153,164 wage base ceiling, 100% of their wages — the full $75,000 — is subject to SDI withholding. There is no minimum threshold to reach before withholding begins.
Why the Other Options Are Wrong
Option A: $68,400
$68,400 is not relevant to this calculation. It appears to be a distractor possibly referencing old Social Security wage base figures or an incorrect deduction calculation. The full $75,000 is taxable because it is under the SDI wage base.
Option B: $145,600
$145,600 would only make sense if the question were asking about wages in excess of some threshold subtracted from the wage base, which is not how SDI works. SDI applies from dollar one up to the wage base — there is no lower exclusion.
Option C: $153,164
$153,164 is the wage base limit, not the amount subject to withholding. This would only be the correct answer if the employee earned $153,164 or more. Since this employee earns only $75,000, withholding applies to $75,000, not to the full wage base.
Memory Technique
Think of the wage base as a ceiling. If you're below the ceiling, every dollar you earn gets taxed. If you're above the ceiling, only earnings up to the ceiling get taxed. $75,000 is well below the $153,164 ceiling, so answer = $75,000.
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