Should I report my wife's medical leave benefit from WA(for child birth) as income, and if so, what percentage of the benefit received should be reported?

My answer and the reason is because I see it says Edited. This means several of had a discussion and the only change was to expand on the federal taxation - to make it more clear.

One problem is that forms were issued in January 2025. Amongst that and after many forms were mailed, the IRS issued guidance in Jan 2025.  The IRS guidance states:

• 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.

Let's make sure you understand:

1099-G only include the family leave portion  for TY 24 and is taxable to the federal. See WA 1099-G insert.

Medical leave is taxable for the portion (%) the employer paid.

For example: Wife pays 80% of the medical leave premium, then 80% of the medical leave is not taxed. Only the amount (%) paid by the employer is taxed.

Reference:

Payments - Washington State's Paid Family and Medical Leave