Washington State Paid Family / Medical Leave PFML Withholdings - Are These Deductible As State Income Tax?

Question

Washington state's Paid Family / Medical Leave premium looks and smells like a state income tax. It's mandatory and it's deducted from your paycheck like any federal or state income tax.

Can the amount you pay in for PFML be used to offset and reduce your federal income tax - much like regular state income taxes paid would?

Answer 1

To the best of my knowledge, the IRS hasn't yet provided any guidance on the matter.

Publication 17, which lists programs that the IRS does consider to be deductible taxes, lists the Washington State Supplemental Workmen's Compensation Fund, but not the PFML.

The many governors of the States with similar programs have requested guidance from the IRS on this (this article dated January 2024), so stay tuned.

For the 2023 return you have several options:

1. Claim the SALT based on your sales tax instead of income tax. That may be more beneficial even if PFML is determined deductible. You cannot use both sales tax and income tax for SALT deduction, you must choose one.
2. Deduct as income tax and risk having an argument about it with the IRS. You may end up being the lucky one to set a precedent if you prevail.
3. Don't deduct, and amend the return when the guidance is issued, if it is favorable.

Answer 2

The 2023 Form 1040 Schedule A instructions for line 5a says:

If you don't elect to deduct general sales taxes, include on line 5a the state and local income taxes listed next.

[...]

• Mandatory contributions to state family leave programs, such as the New Jersey Family Leave Insurance (FLI) program and the California Paid Family Leave program.

That would seem to fit closely with the contributions you are talking about.