New Tax Credit Rewards Employers Who Pay Employees on FMLA Leave

One potentially overlooked new credit available thanks to Tax Reform is now available. Internal Revenue Code Section 45S provides a tax credit for employers who provide paid family and medical leave to their employees. But you need to act quickly, because the tax credit is only good for 2018 and 2019!

Q: What is the employer credit for paid family and medical leave?

A: This is a general business credit employers may claim, based on wages paid to qualifying employees while they are on family and medical leave, subject to certain conditions.

Q: Who may claim the employer credit for paid family and medical leave?

A: Employers must have a written policy in place that meets certain requirements, including providing:

  1. At least two weeks of paid family and medical leave (annually) to all qualifying employees who work full time (prorated for employees who work part time), and
  2. The paid leave is not less than 50 percent of the wages normally paid to the employee.

Q: What is “family and medical leave” for purposes of the paid family and medical leave credit?

A: This is leave for one or more of the following reasons:

  1. Birth of an employee’s child and to care for the child.
  2. Placement of a child with the employee for adoption or foster care.
  3. To care for the employee’s spouse, child, or parent who has a serious health condition.
  4. A serious health condition that makes the employee unable to perform the functions of his or her position.
  5. Any qualifying exigency due to an employee’s spouse, child, or parent being on covered active duty (or having been notified of an impending call or order to covered active duty) in the Armed Forces.
  6. To care for a service member who is the employee’s spouse, child, parent, or next of kin.

For more information, call us! For further reading see IRS Notice 2018-71.

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