FAMLI payments taxable for Federal?

[Drphibes]

There seems to be some confusion on if FAMLI payments are taxable for federal.  I did see an article for guidance for 2025 which seems to suggest that if the payments are used for your own health, not taxable, but if for any other reason then taxable, but have not see anything for 2024.  Anybody else have an idea on this?  Thanks in advance!

[BobKamman · Accepted solution]

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.

https://www.irs.gov/newsroom/irs-issues-guidance-for-the-district-of-columbia-and-states-that-have-p... 

[qbteachmt]

This is a nice clear article:

https://www.adp.com/spark/articles/2025/01/irs-releases-taxation-guidance-on-state-paid-family-and-m...

[Drphibes]

Ya, saw this article.  However, it is the rules for 1/1/25 and forward, was looking for 2024 rules.  Thanks for the effort.

[Drphibes]

Thanks, guess I'll have to rely on the current 2025 view on this for last year and keep my fingers crossed 😉

[qbteachmt]

"However, it is the rules for 1/1/25 and forward"

It is a release of clarity.

First, it is noted: "the IRS guidance differentiates the taxation of benefits received for family leave from those received for the employee's medical leave for their own health condition."

So, the difference is being clearly stated with a transition period for enforcement and compliance. It doesn't define that the treatment has changed from a prior year: "a transition period for purposes of IRS enforcement and administration of the information reporting requirements"

It also explains the payments "in" are taxable: "Employee required SPFML premium amounts paid by an employer are considered taxable income to the employee for federal income tax and employment tax (e.g., Social Security) regardless of state income tax treatment."

Your perspective is for payments out, right? "programs to provide wage replacement for employees who need to take time off from work due to their own non-occupational injuries, illnesses, or medical conditions, or to care for a family member due to the family member's serious health condition or other specific circumstances."

"Additionally, the IRS guidance differentiates the taxation of benefits received for family leave from those received for the employee's medical leave for their own health condition."

They use Medical leave (for the employee's own condition) vs Family leave (for the benefit of the employee, to be able to care for another person), which seems to be what you are looking for:

• 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.