Question

Deducting CT paid family leave as income tax paid to another state

Forum|Forum|3 years ago
February 19, 2023
1 reply
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I live in NY with wife, and wife works in CT. We file a nonresident CT return and then a resident NY return. For the resident NY return, we normally take the income tax paid to CT as a credit. However, since there is a new paid family leave payroll tax in CT, I would think that this payroll tax should be deducted as well. That is, the total credit for taxes paid to CT should equal the CT income tax + the CTPFL payroll tax. The IRS has previously ruled the PFL payroll taxes are income taxes. However, Turbotax does not seem to know about this at all. Turbotax wants to just have my NY credit for taxes paid to CT be equal to my CT income tax. Turbotax lets you override this, but I find it odd that Turbotax does not know about the CTPFL, since this must be a common situation.

Has anybody else encountered this issue? Is Turbotax just not caught up to how to handle CTPFL, or am I misinterpreting that CTPFL premiums can be treated as an income tax paid to another state?

KrisD15

CTPFL is reported in Box 14 on a W-2 which is where your payroll department can enter information they find helpful, but not necessarily tax related.

If the CTPFL tax is listed there, be sure to select "Other deductible state or local tax" from the Category drop-down list on the W-2 input screen and the tax will carry to Schedule A.

Of course the SALT (State and Local tax) limit of 10,000 will still apply.

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A

abramfalkAuthor

Thank you for the reply, but I don't believe that you answered my question. My wife and I live in NY, and she works in CT, and I work in NY. The issue is the question of whether, when calcuating my tax credit for taxes paid to another state on my NY return, I can deduct my CTPFL paid by my wife to CT. The IRS has ruled that paid family leave taxes are income taxes, even though they are payroll taxes. Therefore, I believe that when calculating my credit on my NY return for taxes paid to another state, I should add the CTPFL payroll taxes to my CT income taxes. However, Turbotax does not seem to suggest doing this. Is Turbotax missing that CTPFL ought to be credited on another state's return?

AmyC

Employee

NY considers the money paid for family leave as a premium for insurance. NY does not consider it as a tax on income. PFL is not mentioned in the NY instructions or credit.

CT considers the PFL cost as premiums paid since it is an insurance policy.

Insurance premiums do not count as tax paid and would not be included.

Reference: New York State Paid Family Leave - Tax.NY.gov & BY-LAWS OF CT PAID FAMILY AND MEDICAL LEAVE

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