New Tax Credit for Paid Family and Medical Leave - A Global Tax Blog Article from KLR

Global Tax Blog

New Tax Credit for Paid Family and Medical Leave

posted Dec 20, 2018 by Leigea Landry, CPA, MST in the Global Tax Blog

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Attention employers…do you provide paid family and medical leave to your employees? You may qualify for a new business credit for tax years 2018 and 2019. Under Section 45S of the Tax Cuts and Jobs Act (TCJA) employers who pay qualifying employees at least 50% of their salary while on family and medical leave (for up to 12 weeks in a year) qualify for a general business credit. Learn how you can claim this benefit.

Some background info…

The Family Medical Leave Act (FMLA)

The FMLA was enacted in 1993 and requires large employers (50 or more employees) to provide up to 12 weeks of protected leave to qualified employees for family care or medical reasons.

Note that while the FMLA requires that large employers provide protected leave, it does not require that this leave be paid, though most employers tie FMLA leave in with their paid time off policies.

Requirements

FMLA eligibility requires the following….

  • Written policy that requires at least 50% payment for at least two weeks and no more than 12 weeks to employees who work at least 30 hours. The two weeks can be prorated for less than 30 hour employees.
  • Employees must have been employed for at least 12 months
  • Must cover all employees for the reasons specified by FMLA

Tax credit:

  • Available for 2018 & 2019
  • Credit equals 12.5% when 50% of wages are paid and increases to 25% if 100% of wages are paid
  • Wages used to determine other general business credits can’t be used again for this credit
  • There is no credit for “highly compensated” employees (if the employee was paid more than $72,000 in 2017, he/she is ineligible for 2018 credit)
  • Any leave paid or required to be paid by a state or local government will also not be taken into account

Massachusetts’ FMLA program…recent news

Check out our recent blog, “Two Major Changes Coming for Massachusetts Employers in 2019”. Essentially MA recently introduced a state mandated paid family and medical leave program that covers up to 12 weeks for family leave and 20 weeks for medical leave.

If you are subject to FMLA don’t miss out on this valuable tax benefit! Questions? Contact us.