WA PFML medical leave (not family leave) taxable?

[AmyC]

1. Right! No tax for you at the state level. If you paid for the medical insurance with taxed dollars, it isn't taxable on the federal level either, see Revenue Ruling 2025-04. If you paid a portion, that portion is tax free at the federal level.

2. Nope. The medical leave is not taxed for you and why you didn't get a form. Payments - Washington State's Paid Family and Medical Leave which states: If you received both family and medical leave, your 1099-G will only include the family leave portion. 

3. Thank you and have a great weekend!

@ada2evelyn 

[Edited 3/11/2025 | 12:52 PST to include federal] 

[ada2evelyn]

Really helpful!

Thanks a lot.

@AmyC 

[bestofluck1]

HI, @AmyC - Thanks for your reply and explanation. It makes a lot of sense. I have a similar case where I took the medical leave for my own condition in WA and got the WA PFML payments. I also checked my payslips and similar to original poster, I am paying the WA PFl as employee taxes. My employer uses Lincoln financial to file the WA PFML claim and the payments are routed through Lincoln financial. Lincoln financial has sent me a W2 for year 2024, with Box 1,3 and 5 as the $16,016 which is the same amount from WA PFML. The W2 also has tax deducted in box 2,4 and 6. There is no code on box 12 and box 13 mentions Third party sick pay.

I have reached out multiple times to Lincoln to correct this W2 as the amount is non taxable but Lincoln has denied to correct the form. How do I file it in Turbo tax so that I do not have to pay taxes on this amount received? I will appreciate your response. @DaveF1006

[DaveF1006]

To clarify, did you pay the premiums of your medical insurance out of your own pocket or did your employer pay for them with pre-tax dollars? Please reply back @DaveF1006 because if you paid for the premiums out of your own pocket, I will tell you how to exclude this from federal income,

If the premiums were taken from your paycheck, check with your employer to see if they were paid before you had to pay taxes. If they were, then you will have to pay federal income taxes on this.

@bestofluck1 

[bestofluck1]

@DaveF1006 - The premiums were taken from my paycheck and are listed under the employee taxes. I also checked paycheck of a friend who received WA PFML directly from state in 2024 (no tax form) and they also had it deducted in the same way which is listed under the employee taxes and not in deductions. So the deductions are same between someone who directly applied on WA PFML website or my case where it's WA PFML administered through the Lincoln Financial.

What do you think if I need to pay taxes on it? If not, how do I handle the W2. @AmyC reply above mentions that it's not taxable as per the new IRS ruling.

[AmyC]

WA state is only sending out forms for family leave, not medical leave and clearly state no tax advice. Taxable medical is required to be issued a form with the employee percentage not included in taxable income.

The IRS guidance states:

• An employee who receives state paid family leave payments must include those amounts in the employee’s gross income. 
• An employee who receives state paid medical leave payments must include the amount attributable to the employer portion of contributions in the employee’s gross income. 
• This latter amount also is subject both to the employer’s and employee’s shares of Social Security and Medicare taxes. 
• The amount attributable to the employee’s portion of the contributions is excluded from the employee’s gross income, and this amount is not subject to Social Security or Medicare taxes.

ADP Payroll offers:

State Family Leave Benefits Paid to Employee:

• Amounts paid to the employee under the family leave provisions of the SPFML are to be included in the employee's federal gross income, regardless of whether the employee or employer paid the premiums.
• SPFML benefits paid to the employee are NOT considered wages for federal employment taxes, such as Social Security and Medicare.
• The state paying the benefits to the employee must file with the IRS and furnish to the employee a Form 1099.

State Medical Leave Benefits Paid to Employee:

• Amounts paid to the employee under the medical leave provisions of the SPFML are to be included in the employee's federal gross income UNLESS "time off from work is necessary because of the individual's own serious health condition, and the medical leave benefits that are paid…are, in fact paid as a result of the employee's own serious health condition."
• Amounts paid for the employee's own serious health condition are treated as amounts received through accident or health insurance. The taxation of such benefits are dependent on the percent of the premium paid by the employer and employee.
• Employees must include in their federal gross income, any amount received attributable to the employer state mandated premium percentage. For example, if an employer is required to pay 40 percent of the premium, then 40 percent of the amount received by the employee is subject to federal income, as well as employment taxes.
• Amounts received by the employee attributable to employee contribution percentage in addition to any percentage of employee contribution, as well as any voluntary payment by the employer of the employee contribution required by the employee, are excluded from the employee's federal gross income. For example, the state mandates the employer pays 40 percent of the SPFML premium and the employee portion is 60 percent. However, the employer voluntarily pays half of the employee's portion totaling 30 percent. The employee would still only be taxed on the state employer premium mandated amount of 40 percent.

Federal:

• Medical - percentage paid by employer is taxable.
• Family leave is included in income and fully taxed.

The law changes in January retroactively, the forms sent ahead of laws changing, all of it comes together to make it harder on the taxpayer. You may not have taxable income - if you paid the premiums, no tax on the medical portion.

References:

• Washington state paid family and medical leave
• Lincoln has been recognized now as filing w2.

[bestofluck1]

Thanks for responding. @AmyC - Your reply above on Mar 7 2025 mentioned WA PFML will not be taxable for employee own medical condition, but this reply mentions that we need to identify % of WA PFML contribution by the employer and employee.

I want to go with the Mar 7 2025 reply since WA PFML is not issuing any tax forms when filed directly.

How do I handle the W2 from Lincoln in this case, so that I do not pay taxes on this income? @DaveF1006 

[MarilynG1]

To determine if you received PFL, check box 14 on your W-2. If an amount is entered there, then you received Paid Family Leave. Enter your W-2 exactly as you received it in TurboTax. You will be taxed at the Federal level, and not taxed at the State level for these benefits.

Typically, companies that offer paid medical leave or disability do so through a third-party insurer. You may receive a separate W-2 from that insurer to report the PFL income.

Here's more info on Reporting PFL Income.

@bestofluck1 

[bestofluck1]

Hi @DaveF1006 - I am still waiting for your reply on how exclude this from federal income. Please share once you get some time.

Thanks

[RobertB4444]

How was the PFML reported to you?  If it was reported on your W2 as income then it's taxable.  If it was reported as an item in box 14 of the W2 then the percentage that is taxable is explained by @AmyC above.  If it was not reported on any form at all and it was paid to you as medical leave then it may not be taxable at all.

@bestofluck1