IRS Releases Guidance on Taxes for State Paid Leave Programs

The IRS issued guidance on different tax treatment scenarios for contributions to paid family and medical leave programs.

Employers can deduct the amount paid to mandatory state leave programs as an excise tax, according to the guidance. Employees can deduct their contributions as income tax, so long as they itemize and don’t exceed state limits.

Workers must also include state family leave payments in their gross income, as well as paid medical leave payments attributable to their employer’s portion.