Paid Family Leave (PFL) income is taxable on the federal return, but it is non-taxable on the California State return if either of the following situations apply:
- It’s paid by the state's Employment Development Department (EDD) and appears on a 1099-G form
- It’s paid by an insurance company under a Voluntary Plan for Disability Insurance (VPDI) and is reported on a W-2 from the insurance company
PFL isn’t included in your employer's regular W-2. Instead, it’s reported on a separate W-2 from the insurer.
Amounts labeled as “PFL” on the W-2 from your employer are taxable both on the federal level and state levels.
Unemployment compensation and paid family leave from the EDD (Form 1099-G) are entered in the same place:
- Open or continue your tax return.
- In the Help panel, search for unemployment compensation and select the Jump to link at the top of the search results.
- On the Did you receive unemployment or paid family leave benefits in 2019? screen, answer Yes.
- Follow the onscreen instructions to enter your 1099-G information.
When you indicate in TurboTax that the W-2 is PFL, a screen about PFL appears in the California section of the interview.
The amount of PFL wages on the W-2 is displayed, so you don’t have to look it up. However, you must enter the amount (if any) that was paid by an insurance company, and not your employer.
If none of the amount was paid by an insurance company, but all of it was paid by your employer, then you must enter zero ($0) in the wages box, because any amount reported by your employer in box 16 of a W-2 is considered by California as compensation for services or taxable fringe benefits.
Note: Compensation for short-term disability, vacation days, sick leave, and other employer benefits aren’t considered to be tax-free PFL.