How to Report Paid Family Leave on a Tax Return

Receiving Paid Family Leave (PFL) benefits provides crucial support during important life events, but it also raises a key question when tax season arrives: How do you report it? The way PFL is taxed and reported depends entirely on your state and who pays the benefits. This guide will walk you through whether your PFL is taxable and provide clear, step-by-step instructions for reporting it correctly on your federal tax return.

Is Paid Family Leave Taxable? It Depends on Your State

The tax treatment of PFL benefits isn't straightforward because there’s no single federal rule that applies to every situation. The most important factors are where you live and whether the benefits come from your employer, a private insurance policy held by your employer, or a state-administered fund.

As a general rule at the federal level, if your PFL is funded by your employer (even through a third-party insurer), it is considered a replacement for wages and is federally taxable. If your benefits are paid from a state government fund, they are typically considered a form of unemployment compensation, which is also taxable at the federal level. The key difference lies in how it’s reported and where it shows up on your tax return.

State taxation is a different story. Many states that administer PFL programs do not tax the benefits themselves. Let’s look at how some of the most prominent state plans work.

California (CA)

California's PFL is a component of its State Disability Insurance (SDI) program. Benefits you receive are partially funded by employee-paid SDI contributions, which are made with post-tax dollars.

• Federal Tax: Taxable. Your CA PFL benefits must be reported as income on your federal tax return.
• State Tax: Not taxable. You do not include PFL income on your California state tax return.
• Tax Form: You'll receive a Form 1099-G, Certain Government Payments, from the state's Employment Development Department (EDD). Box 1 shows your total benefits received.

New York (NY)

New York has a mandatory PFL program funded exclusively through employee payroll deductions. Because these deductions are taken from your pay after tax, the tax treatment of the benefits differs from some other states.

• Federal Tax: Taxable.
• State Tax: Taxable. You must report these benefits on your New York state return.
• Tax Form: You will receive a Form 1099-MISC, Miscellaneous Information, from your employer or their insurance carrier. The benefit amount will be in Box 3 ("Other Income").

New Jersey (NJ)

New Jersey's Family Leave Insurance (FLI) program provides benefits through the state.

• Federal Tax: Taxable.
• State Tax: Not taxable. NJ does not tax FLI benefits for state income tax purposes.
• Tax Form: The state will send you a Form 1099-G which reports the total benefits paid.

Massachusetts (MA)

The Massachusetts Paid Family and Medical Leave (PFML) is a state-administered program. While state law is clear, federal guidance is still pending, leading to a unique situation.

• Federal Tax: Considered taxable by the IRS. Unless specific guidance is issued stating otherwise, assume PFML benefits are subject to federal income tax.
• State Tax: Not taxable. Per state law, these benefits are not included in Massachusetts gross income.
• Tax Form: You'll receive Form 1099-G from the Department of Family and Medical Leave.

Other States with PFL Programs

States like Washington, Connecticut, Oregon, Colorado, Delaware, Rhode Island, and Washington D.C. all have their own PFL programs. In almost all cases, the benefits are taxable at the federal level but are often exempt from that state's own income tax (if it has one). Always check with your state's tax agency for the most accurate information on how to treat the income for state filing purposes.

Finding Your PFL Information: Key Tax Forms Explained

Before you can report anything, you need an official record of the income you received. Depending on your situation, this information will arrive on one of three common tax forms.

Form W-2, Wage and Tax Statement

If your employer paid your family leave benefits directly or through a self-funded plan, the income is treated like regular wages. Companies often handle it this way to ensure seamless payroll continuity. In this case, your PFL income will be already included in Box 1 (Wages, tips, other compensation) of your Form W-2. Your employer might also add an informational note in Box 14 ("Other") describing the amount, such as "PFL" or "Disability Pay."

Form 1099-G, Certain Government Payments

If your benefits are paid directly by a state-administered fund, you will receive Form 1099-G. This is the same form used to report unemployment compensation, and the government generally classifies state-paid PFL benefits the same way for tax purposes. The total PFL benefits paid to you will be reported in Box 1 ("Unemployment Compensation"). This is the form you'll get from states like California, New Jersey, and Massachusetts.

Form 1099-MISC, Miscellaneous Information

This form is most commonly associated with New York’s PFL program. Because the state’s program is funded by employees through a designated insurer acting on behalf of the employer, the income is classified differently. The PFL benefits are reported in Box 3 ("Other Income") of Form 1099-MISC. It is not considered wages and is not subject to Social Security or Medicare taxes.

Step-by-Step Reporting on Your Federal Tax Return

Once you’ve identified the correct form, reporting the income on your Form 1040 is a matter of transcribing the number to the right place. Here’s how to handle it based on the form you received. Common tax preparation software like TurboTax can guide you through these entries.

If you received a Form W-2:

This is the most straightforward scenario. Your PFL income is already included in your total wages in Box 1.

1. Take the amount from Box 1 of your Form W-2.
2. Enter this total amount on Line 1a of your Form 1040.

There is nothing else to do. Because the PFL was treated as wages, any associated federal and state taxes should have been withheld, as shown in the other boxes of your W-2.

If you received a Form 1099-G:

When PFL is reported as unemployment compensation, it must be reported on Schedule 1 of your Form 1040.

1. Locate the amount in Box 1 ("Unemployment Compensation") of your Form 1099-G.
2. Find Schedule 1 (Form 1040), "Additional Income and Adjustments to Income."
3. Enter the amount from Box 1 of your 1099-G on Line 7 ("Unemployment compensation") of Schedule 1.
4. Complete the rest of Schedule 1. The total from Line 10 (or Part II for deductions) will flow to Line 8 of your main Form 1040.

If you received a Form 1099-MISC:

For miscellaneous PFL income (like in New York), the process is similar to reporting 1099-G income, just on a different line.

1. Take the amount from Box 3 ("Other Income") of your Form 1099-MISC.
2. Go to Schedule 1 (Form 1040).
3. Report the amount on Line 8z, "Other income. List type and amount."
4. In the space provided, write a description, such as "Paid Family Leave BENEFITS" or "NY PFL".
5. The amount will be included in the total on Schedule 1, which then transfers to Line 8 of your Form 1040.

Don't Forget About Tax Withholding

One of the biggest issues with PFL benefits, especially those paid by a state agency via a 1099-G or 1099-MISC, is that federal income taxes are not always withheld automatically. This can lead to a surprise tax bill and potential underpayment penalties when you file.

Unlike employer-paid PFL, where taxes are part of payroll, state agencies usually only withhold tax if you specifically request it. You can do this by submitting Form W-4V, Voluntary Withholding Request, to the agency paying your benefits. If it's too late for that, you can make quarterly estimated tax payments to the IRS during the year to cover the tax you'll owe on the PFL income. Proactively managing this prevents a potential cash flow issue at tax time.

Final Thoughts

Determining how to report your Paid Family Leave is a logical process: identify your state's rules, find the correct tax form (W-2, 1099-G, or 1099-MISC), and move that income to the correct line on your Form 1040. This ensures your income is reported accurately and keeps you in compliance.

Correctly reporting PFL is just one of many state-specific tax rules professionals handle daily. For more complex questions on multi-state tax implications, nexus rules, or other compliance issues, we turn to tools dedicated to accurate research. With Feather AI, professionals get fast, citation-backed answers from authoritative IRS and state tax sources, helping make sure their client guidance is always built on a solid foundation.