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State of California Franchise Tax Board

Westly: State Won't Tax Paid Family Leave Benefits

State Controller and Franchise Tax Board (FTB) Chair Steve Westly announced that benefits paid to employees participating in the Paid Family Leave program are not subject to California income tax.

"I'm delighted to tell Californians they can take time to be with their newborn children or care for their loved ones without worrying about getting stuck with a state tax bill," said Westly.

The new law (SB 1661 Kuehl, Ch. 2002) extends disability compensation to people who take time off work to care for a seriously ill child, spouse, parent, domestic partner, or to bond with a new baby or adopted child. Because the benefits paid are in the nature of unemployment compensation, California law considers it nontaxable income for state purposes. Anyone eligible starting July 1, 2004, can claim weekly benefits of up to $728 for a maximum of six weeks.

The Paid Family Leave program is part of the State Disability Insurance (SDI) program administered by the Employment Development Department. An estimated 13 million California workers covered by SDI or a similar Voluntary Plan are eligible for this benefit.

The Paid Family Leave program is funded through worker contributions. To learn more about it, visit the Employment Development Department's Website at or call (877) 238-4373.

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