NY PFL benefits are entirely taxable on both the federal return and the state return.
The reason that they are entirely taxable is because the PFL contributions are deductible on Schedule A. Since the contributions were deductible, then the return of contributions as PFL is taxable.
The PFL contributions are automatically deducted by TurboTax when they are correctly coded in box 14 of your W-2 and you choose the correct category for the entry "NYPFL".
A TurboTax "champion" (formerly called "superuser") named @rjs very helpfully pointed out that the exact wording of the category for box 14 varies somewhat between the different versions of TurboTax. Please choose the one that matches most closely:
- Other mandatory deductible state or local tax not on above list
- Other Mandatory Deductible State or Local Tax Not Listed Above
- Other mandatory deductible state or local tax not listed
- Other deductible state or local tax
