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Paid Family and Medical Leave (PFML) Tax Information for Employers

Learn more about the taxes employers may need to remit and report on PFML benefit payments.

IMPORTANT UPDATE: New Massachusetts legislation, Chapter 101 of the Acts of 2026, mitigates the impact of IRS guidance on the tax treatment of Massachusetts PFML benefits. 

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How Upcoming PFML Contribution Rate Changes Impact Tax Guidance

Previously,the Department of Family and Medical Leave (DFML) distributed information about IRS Revenue Ruling 2025-4, which clarified that medical leave benefits attributable to employer contributions are taxable wages. In response to the IRS guidance, Governor Healey signed Chapter 101 of the Acts of 2026 on June 12, 2026. This legislation mitigates the impact of tax and reporting requirements on employers by adjusting how PFML contributions are structured. Under this new legislation, no employer contributions will be made for medical leave benefits, so no medical leave benefits will be taxed as wages. The 2027 contribution rate, to be determined by the Department on or before October 1, 2026, will reflect the legislative change for contribution rates that takes effect beginning on January 1, 2027. Learn more about PFML contribution rates.

Tax Guidance for Massachusetts Employers in 2026

For the calendar year 2026: 

  • DFML will not treat medical leave benefit payments as “third party sick pay.”
  • There will be no new employer withholding or reporting requirements for PFML benefits.
  • There will be no changes to employer FICA or FUTA tax responsibility for PFML benefits.
  • Employees may continue to elect federal and state income tax withholding on taxable benefits.
  • For employers with 25 or more employees, sixty percent (60%) of the medical leave benefits paid to employees will be will be taxable for federal and state income tax purposes. This is based on employer contribution amounts. DFML will report the taxable amount on Form 1099-G, which will be issued directly to employees.
  • Medical leave benefits paid to employees of employers with fewer than 25 employees are not taxable.
  • 100% of family leave benefit payments will be taxable for federal and state income tax purposes. DFML will report the taxable amount on Form 1099-G, which will be issued directly to employees.

Forthcoming Tax Information for Employers

DFML will continue to update the information on this website and in our email communications with employers. If you do not currently receive our email newsletter and would like to do so, please sign up here to join our mailing list.

Date published: October 8, 2025
Last updated: December 29, 2025

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