Is NY's PFL benefits entirely taxable or only the amount that exceeds the taxpayer's PFL contributions?

Forum|Forum|6 years ago
July 31, 2020
3 replies
50 views

Pfl works similarly to unemployment comp, and there you only pay taxes on benefits that exceed UI contributions.

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BillM223

Level 15

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

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yochanon94Author

Level 2

Thanks @BillM223 for answering. If you don't mind following up:

1. My question was when someone files using the standard deduction. When you say that it's not deductible because it's a tax, are you referring to this situation too or just when someone itemizes?

2. You're saying that NYPFL contributions are a tax and thus deductible under the SALT deduction. Would that be true even in a situation which the employer uses private insurance to give the state-mandated benefit. (In NY you have a choice between using the State Insurance Fund or private Insurance. I received a 1099-MISC from a private insurance company.)

yochanon94Author

Level 2

Apparently the IRS in revenue ruling 81-192 answered a similar question in regards to employee contributions to New York's Nonoccupational Disability Fund. They hold that only if the State's Insurance Fund is used is it considered a tax under IRC sec 164(a). The IRS writes that contributions to a private plan, even if state-mandated, cannot be considered a "tax".