The Delaware paid family leave tax is a payroll contribution of up to 0.8% of an employee’s gross wages that funds the state’s Healthy Delaware Families Act insurance program. Employers began withholding and remitting on January 1, 2025, and workers became eligible to draw benefits on January 1, 2026.1Delaware Department of Labor. Delaware Paid Leave The law lets employers pass up to half of the cost to employees through payroll deductions, so a typical paycheck deduction lands at 0.4% of wages.
How the 0.8% Breaks Down
The total rate isn’t a single line item. For 2025 and 2026, it’s the sum of three separate contributions tied to the three types of leave the program funds:2Delaware Code Online. Delaware Code Title 19, Chapter 37 – Family and Medical Leave Insurance Program
- Medical leave: 0.4% of wages
- Parental leave: 0.32% of wages
- Family caregiving and military qualifying exigency leave: 0.08% of wages
The rate applies only to wages up to the Social Security wage base, which is $184,500 for 2026.3Social Security Administration. Contribution and Benefit Base Earnings above that cap aren’t taxed. At the cap, the combined contribution from employer and employee tops out at $1,476 for the year.
Rates are fixed through 2026. Starting in 2027, the Delaware Department of Labor adjusts them annually based on claims experience, with a statutory ceiling: the fund can only collect enough to cover 125% of the prior year’s benefit payouts and administrative costs, minus any surplus already on hand.2Delaware Code Online. Delaware Code Title 19, Chapter 37 – Family and Medical Leave Insurance Program
Who Pays: Employer and Employee Shares
The statute allows employers to deduct up to half of the total contribution from employee paychecks.2Delaware Code Online. Delaware Code Title 19, Chapter 37 – Family and Medical Leave Insurance Program For an employee earning $80,000 a year, that means up to $320 withheld annually (0.4% of wages), with the employer paying the other $320. Some employers cover the full amount as a workplace benefit, but the default is a 50/50 split.
Whichever way the cost is split, the employer handles the administration: calculating the withholding, remitting funds to the state, and filing quarterly wage reports through the state’s online system, Delaware LaborFirst.1Delaware Department of Labor. Delaware Paid Leave
If an employer voluntarily picks up the employee’s share, the IRS treats that pickup as additional taxable compensation to the worker. It shows up on the W-2 and is subject to federal income and employment taxes. The employer can deduct it as a business expense.4Internal Revenue Service. Revenue Ruling 2025-4
Which Delaware Employers Owe the Tax
Contribution obligations depend on headcount, and the tier determines which of the three components an employer must fund:5Justia Law. Delaware Code Title 19, Chapter 37, Section 3701 – Definitions
- 25 or more employees: All three components, for a total rate of 0.8%.
- 10 to 24 employees: Parental leave only, at 0.32%.
- Fewer than 10 employees: Exempt from mandatory participation, though they may opt in.
Headcount includes workers who meet the program’s eligibility requirements (12 months of employment and 1,250 hours worked) or who are reasonably expected to meet them. The federal government is exempt, as is any business that shuts down entirely for 30 or more consecutive days per year.5Justia Law. Delaware Code Title 19, Chapter 37, Section 3701 – Definitions
Quarterly Reporting and the 2025 Grace Period
Employers submit wage reports and contribution payments quarterly through Delaware LaborFirst. The first Hours and Wage Report was due April 30, 2025, and contribution payments for the first two quarters were due by July 30, 2025.1Delaware Department of Labor. Delaware Paid Leave
The Division of Paid Leave built in transition relief for the program’s first year. It is not charging penalties or interest on any 2025 quarterly submissions and contribution payments, provided they are filed by March 31, 2026.1Delaware Department of Labor. Delaware Paid Leave Employers still catching up on payroll changes should treat that date as the hard cutoff for filing without financial consequences.
Federal Tax Treatment of the Withholding
The IRS addressed Delaware’s program (and comparable state programs) in Revenue Ruling 2025-4. The employee-paid portion of the payroll contribution is included in gross income and subject to federal income tax, Social Security, and Medicare. It’s an after-tax deduction, not pre-tax.4Internal Revenue Service. Revenue Ruling 2025-4
The IRS treats those mandatory employee contributions as state income tax payments, meaning workers who itemize on their federal return can deduct them, subject to the $10,000 SALT cap.4Internal Revenue Service. Revenue Ruling 2025-4
The Private Plan Alternative
An employer can opt out of paying into the state fund by offering a private plan that meets or exceeds the state program’s benefits. To win approval from the Department of Labor, the plan must cover the same leave types for the same maximum weeks, match or beat the wage replacement rate and weekly benefit floors and ceilings, allow intermittent leave, include an internal appeal process, and cost employees no more than they would pay under the state program.2Delaware Code Online. Delaware Code Title 19, Chapter 37 – Family and Medical Leave Insurance Program Employers can fund a private plan through a third-party carrier or by self-insuring. The employee-cost requirement trips up a lot of plans in the design phase: a private plan that shifts more than half the premium to workers will not be approved.
Whether an employer uses the state fund or a compliant private plan, the underlying payroll math is the same: up to 0.8% of covered wages, with no more than half of that amount deducted from the employee.