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TJCA provides tax credit to employers that offer paid family and medical leave

May 31, 2018

By Zachary T. Payne
Senior Tax Accountant

A new temporary tax credit is available to employers who offer their employees paid family and medical leave, effective with the current 2018 tax year.   

Under the Tax Cuts and Jobs Act enacted last December, employers can claim a tax credit equal to 12.5% of the amount paid to qualified workers who take family and medical leave, if they pay the employees at least 50% of their normal wages during the leave.

Determining the maximum tax credit

Example: ABC Corporation pays $9,000 in wages to a qualifying employee for her three-month family and medical leave, which is 50% of the normal wages she would make during that length of time. ABC can claim a tax credit of $1,125 – which is 12.5% of $9,000.

Tax credit only good for two years

It is important to note that this tax credit is available only for two years – covering only 2018 and 2019 –  unless Congress extends it.

Moreover, employers who want to claim the credit must have written policies in place covering paid family and medical leave. Such policies must provide at least two weeks of paid family and medical leave to qualifying fulltime workers, and must provide at least 50% of the employees’ wages during the leave. Qualifying part-time employees must be given length of leave that is pro-rated to the number of hours they work weekly.

A “qualifying” employee is one who has been employed by the employer for at least one year, and whose compensation does not exceed certain federal thresholds (generally, approximately $72,000 for a fulltime employee).

The maximum length of paid family and medical leave that can qualify for the employer tax credit is 12 weeks per employee, per tax year.

If you have questions about this tax credit – or any other provision of the TCJA – please contact us.




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