A paid family leave tax is a small state payroll deduction that funds paid time off for a new baby, a sick relative, or your own health. In the seven states checked below, the worker share in 2026 runs from about 0.4% to 1.3% of pay. The IRS also counts that money as taxable income. And the benefit you collect later can be taxed again.
So the line is not a payroll error. It is a state program. But the rules around it changed fast, and two states rewrote their laws this year because of the IRS.
Nobody checks the small letters on a pay stub until the total looks wrong. This guide shows what the letters mean, what each state takes in 2026, and where federal tax shows up.
Why the Paid Family Leave Tax Shows Up on Your Pay Stub
States with paid leave programs fund them through payroll. Your employer withholds your share from each check and sends it to the state. Some employers also pay a share from their own money.
The label changes by state. You may see PFL, FLI, PFML, SDI, or a state name with the words paid leave. All of them point to the same idea. A small cut of each check goes into a state insurance fund.
If you take covered leave later, the state pays you a weekly benefit from that fund. In New York, for example, the 2026 benefit is 67% of your average weekly wage, up to $1,228.53 a week.
The deduction also does not cover everyone in the same way. Small employers in Washington, Massachusetts, and Oregon do not have to pay the employer share. In Oregon, a worker with two jobs reaches the wage limit separately at each employer.
What Each State Takes From Your Paycheck in 2026
Here is the employee side only, taken from each state program page. Employer shares are left out because they never leave your pay.
| State | Your 2026 share | Wage limit or yearly cap | Already announced for 2027 |
|---|---|---|---|
| New York | 0.432% of gross wages | Max $411.91 a year | Not stated on the page |
| Washington | 71.43% of a 1.13% premium | Not stated on the page | 1.2% premium, workers pay 70.7% |
| Massachusetts | Up to 0.46% (0.18% family + 0.28% medical) | Not stated on the page | Worker shares switch sides, still up to 0.46% |
| Minnesota | Up to 0.44% (half of a 0.88% premium) | Same wage base as Social Security | 0.88% premium again |
| Oregon | 0.6% (60% of a 1% rate) | Wages up to $184,500 | Not stated on the page |
| New Jersey | 0.23% family leave + 0.19% disability | First $171,100 (max $393.53 + $325.09) | Not stated on the page |
| California | 1.3% SDI | No wage ceiling | 1.4% SDI |
Where Each 2026 Rate Comes From
You can check each number at the source. New York lists its rate on the state Paid Family Leave 2026 page. Washington set its split in a 2025 Employment Security news release. Minnesota shows its split on the Minnesota Paid Leave premium page. It is the newest program here, with first premium payments due April 30, 2026. Massachusetts posts its shares on the PFML contribution rates page.
Oregon explains the 60% employee share on its Paid Leave Oregon contributions calculator. New Jersey lists both programs on its Division of Temporary Disability and Family Leave Insurance page. California states its 2026 rate in the 2026 Household Employer Guide, where the SDI deduction funds both disability and paid family leave. The 2027 rate sits on the EDD tax-rated employers page.
Washington gives the split, not the final rate. Our own math puts the worker share near 0.81% of pay in 2026.
If your first check of the year already looked short, a different set of reasons may be at work:
The Real Reason Your First Paycheck Looks Smaller Than You Expected
A Worked Example: The Same $60,000 Salary in 6 States
Rates look tiny on paper. Dollars feel different. Here is one hypothetical worker earning $60,000 a year, using only the employee share.
| Hypothetical worker, $60,000 salary | Rate used | Yearly deduction | Per biweekly check (26 checks) |
|---|---|---|---|
| New York | 0.432% | $259.20 | About $9.97 |
| Massachusetts | 0.46% | $276.00 | About $10.62 |
| New Jersey | 0.23% + 0.19% | $252.00 | About $9.69 |
| Minnesota | 0.44% | $264.00 | About $10.15 |
| Oregon | 0.6% | $360.00 | About $13.85 |
| California | 1.3% | $780.00 | $30.00 |
Massachusetts and Minnesota use the highest share an employer may collect. Your employer may take less. Washington is left out because the state page gives a split, not a flat worker rate.
The California figure stands out. A worker there pays about three times the New York amount on the same salary. That gap matters when you compare job offers across state lines.
Does the IRS Tax the Money Taken Out?
Under the IRS rules, yes. In January 2025 the IRS issued Revenue Ruling 2025-4 on state paid family and medical leave programs. It says the amount withheld from your wages stays part of your gross income. Your employer still reports it as wages on your W-2.
There is one small offset. The ruling treats your share as a state income tax payment. You can deduct it, but only if you itemize. The deduction also counts toward the federal cap on state and local tax deductions.
So if you take the standard deduction, the money taken out gets no federal tax break at all.
Is the Paid Family Leave Benefit Taxable When You Collect It?
This part is easy to miss. The answer depends on the type of leave.
Family leave benefits, such as bonding with a new child or caring for a relative, count as federal gross income under the ruling. They are not treated as wages, so no Social Security tax applies. The state must send you a Form 1099 if those payments reach $600 or more in a year.
Medical leave benefits for your own health split in two. The part tied to your own contributions is not taxed. The part tied to your employer contributions counts as income and is treated as sick pay.
A quick hypothetical shows the effect. Say a worker collects $8,000 in family leave benefits in 2026 and sits in the 12% federal bracket. That could add about $960 to the federal tax owed. If nothing was withheld, it all comes due at filing time.
If tax time is already on your mind, this guide covers another form that confuses filers:
You Might Not Get a 1099-K This Year, That Does Not Mean You Are Off the Hook
Why 2026 Is a Transition Year
The IRS gave states time to set up their systems. It called 2025 a transition year. Then it issued Notice 2026-6 and extended part of that relief through 2026.
Under the notice, states and employers do not have to withhold or report tax yet on the employer-funded part of medical leave benefits paid in 2026. The relief covers withholding, reporting, and penalties. The notice does not say the income itself stops counting.
One piece did not get extended. If your employer chose to pay your share for you, that amount now counts as extra wages on your W-2 for 2026.
The New Trend: States Rewriting Their Laws Because of the IRS
The IRS rule did not stay on paper. Two states changed their programs in 2026 in response.
Washington passed Second Substitute House Bill 2345. Starting January 1, 2027, it shifts how employer and employee money is divided between the family and medical sides. The total split between workers and employers stays the same. The premium also rises to 1.2%, as the October 2026 Employment Security release explains.
Massachusetts passed Chapter 101 of the Acts of 2026. It moves employer contributions from medical leave to family leave, starting January 1, 2027. The state says the change will reduce the impact of the IRS guidance on how its benefits are taxed.
For workers in those two states, the line on the 2027 pay stub may look different again. In Massachusetts, the most a worker can pay stays at 0.46%. In Washington, the total premium still goes up.
What You Can Do Before Tax Season
Tax season runs from January to April. A few checks now can save stress later.
1. Find the line on your latest pay stub. Look for PFL, FLI, PFML, SDI, or a paid leave label.
2. Multiply your gross pay for that check by your state rate from the table. The result should match the line, give or take a cent.
3. Check your year-to-date total near the end of the year. In states with a cap, the deduction should stop once you reach it.
4. If you work two jobs in Oregon, expect each employer to apply the wage limit on its own.
5. If you took paid family leave this year, look for a Form 1099 from the state program before you file.
6. Set part of each benefit payment aside if no federal tax was withheld from it.
7. If you itemize, add your yearly paid leave deduction to your state and local taxes paid.
Honestly, five minutes with a calculator settles most of the confusion here.
Parents juggling leave and child care costs can face a second payroll puzzle in the same year:
Dependent Care FSA Limit 2026: Why Is Yours Still Stuck at $5,000?
Small payroll lines add up across a year. If you want to keep each one in view, grab a free paycheck log that lines up every state deduction month by month.
The Bottom Line on Paid Family Leave Tax
The paid family leave tax on your pay stub is real, legal, and usually small. It still counts as taxable income at the federal level. A family leave benefit you collect later counts as income too.
The rules are still moving. Washington and Massachusetts already changed course for 2027. Your own state may follow.
Which state shows up on your pay stub, and did the deduction match the rate in the table?
Disclaimer: MoneyWisePro is not a tax preparer or financial advisor. This article is for general information only and is not financial or legal advice. Contact your tax professional or state paid leave program for guidance on your specific situation.
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