Contributed by: AnthonyS, FreeTaxUSA Agent, Tax Pro
Are you wondering how to report the income you received while taking time off under the Family and Medical Leave Act (FMLA). The way this income is reported depends on where it comes from and how it’s paid.
Example
Alex took parental leave after having a baby. Some of the leave was paid by his employer, and some was paid through a state program. Which parts are taxable, and where do they appear on the tax return?
Employer-paid FMLA income
If your employer paid you while you were on FMLA — like sick pay or employer-sponsored parental leave — this pay is treated the same as your regular wages. It’s reported on Form W-2 in Box 1 (wages, tips, other compensation) and included in your taxable income.
State-paid FMLA income
Some states offer paid family leave (PFL) programs. How this income is taxed depends on your situation and your state’s rules:
If you’re the person who is sick or taking leave for your own care:
- Payments are usually treated like disability income.
- In many cases, this money is not taxable at the federal level.
If you receive payments for caring for someone else (like a family member) or for parental leave:
- These payments are generally taxable and reported on Form 1099-G from the state.
- They are considered unearned income, which means they don’t count toward certain credits like the Earned Income Credit (EIC/EITC).
💡Tip: Always check your state’s rules. For example, California, New Jersey, and Rhode Island generally treat paid family leave for your own care as not taxable for federal taxes, but you may owe state taxes on it. New York’s paid family leave is taxable federally but not always taxed by the state.
The IRS doesn’t have detailed, specific rules for every state’s paid family leave yet. In general, these payments are handled like unemployment or disability income. Refer to this Community article on When to report Paid Family Leave and Family Leave Insurance on your taxes or see IRS Publication 525 for more details on taxable and nontaxable income.
How to enter it in FreeTaxUSA
In FreeTaxUSA, report this income based on the form you receive:
- W-2 income: Enter it by following the menu path: Income > Common Income > Wages (W-2).
- 1099-G income: The amount is typically reported in Box 1 of Form 1099-G and should be entered in the software as if it were unemployment compensation. Follow the menu path: Income > Common Income > Unemployment Compensation (1099-G). Answer Yes when asked if you received unemployment compensation reported on a Form 1099-G. Then add your 1099-G information.