The credit for paid family and medical leave, newly available to employers under the Tax Cuts and Jobs act, is a tax credit based on wages paid to their qualifying employees who have taken family or medical leave during the year. Employers may take advantage of this credit for the taxable years 2018 and 2019, after which the credit is set to expire.

The credit amount is at least 12.5 % of the amount of wages paid to the qualifying employee on family or medical leave for up to 12 weeks per year. The amount will increase .25% for each percentage point that the amount of the employee’s leave wages paid exceeds 50% of their regular wages, until it reaches the 25% limit. As with most credits in order to offset wage expenses taking this credit requires the employer to reduce their deduction for wages paid to an employee who is on family or medical leave by the credit amount. Any amount of wages used for other general business credits cannot be used in the credit calculation.

To qualify, an employer must have a written policy that provides at least two weeks per year paid family and medical leave to qualified employees who work full time and the leave payment must not be less than 50 percent of the employee’s regularly paid wages. For part-time employees this will be prorated.

A qualified employee, as outlined by the FLSA (Fair labor Standards Act) is to have been employed for at least one year and who’s wages in the previous year did not exceed the threshold. In order to claim the credit in 2018, the employer can not have compensated the qualifying employee more than $72,000 for 2017.

Paid family and medical leave are not associated with any time provided by the employer for paid vacation days, or medical and sick days. Qualifying leave includes:

  • The birth, adoption, or placement of a foster care of a child with the employee and the time to care for them.
  • A serious health condition experienced by the employee that restricts them from work, or a serious health condition experienced by the employee’s spouse, child or parent that requires their care.
  • Qualifying circumstances related to the employee’s spouse, child, or parent on active duty in the Armed Forces.

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.