Voluntary and state-mandated paid family leave continues to gain traction in the US. According to research published by the National Conference of State Legislators, 7 states have implemented the program, and over 14 percent of civilian workers in the country have access to it. That said, the paid leave provisions raise one question for employees; how does paid family leave affect my taxes?
Let’s review the tax obligations that come with paid leave. If you have concerns about how your employer is handling your leave, consult the expert New Jersey Employment Law Attorneys at the Law Offices of Usmaan Sleemi.
Paid Family and Medical Leave
Many states that offer paid parental leave use FMLA regulations to formulate their rules. Paid family leave rules, on the other hand, differ across states, where either employers or employees may be required to pay into the state fund. Additionally, different states set different reasons for why an employee can take time off under PFL. The portion of the wage received also varies.
Currently, 7 states have implemented state-mandated paid family and medical leave in the United States. They are:
- Washington D.C.
- Washington
- Rhode Island
- New York
- New Jersey
- Massachusetts
- California
Businesses not located in these states may choose to offer paid family leave and may even qualify for an FMLA tax credit from the IRS.
Paid Family Leave in New Jersey
Information on the New Jersey Department of Labor website indicates that employees in New Jersey may qualify for paid family leave if they meet the following wage requirements:
- Have worked at least 20 weeks and made at least $200 per week in the 52 weeks preceding the claim
- Have made at least $10,000 in wages during the same period
You may take family leave to handle the birth or adoption of a child or care for a family member with a serious medical condition. You may not take time off for your own medical condition.
Is Paid Family Leave Taxable?
The paid family leave program is financed through worker payroll deductions, and employers do not contribute to it. Although it changes every year, the taxable wage base in 2018 was $33,700, while the maximum deduction for family leave was $30.00.
If you receive benefits under family leave insurance in New Jersey, the amount may be subject to federal rules of reporting income and paying tax. However, it is not subject to New Jersey state income tax, which means you only need to worry about federal income tax.
Paid family leave contributions are post-tax deductions, meaning your portion will be deductible after withholding taxes, making your contributions taxable.
The state provides PFL benefits, and your employer cannot withhold taxes on them because they are not part of your payroll. You can, however, request that income taxes be withheld by filing a Voluntary Withholding Request.
Talk to a New Jersey Employment Attorney
How does paid family leave affect my taxes? New Jersey law allows you to partial pay when you take time off work to care for a sick family member or bond with a new child. Unlike other insurance programs, this family leave is funded through deductions from your paychecks, not employer contributions.
Do you believe your employer is violating your leave rights? If so, contact the Law Offices of Usmaan Sleemi at (973) 453-4060 to consult one of our top New Jersey Employment Attorneys.
