The Tax Cuts and Jobs Act introduces a new component credit for
paid family and medical leave, i.e. the paid family and medical leave credit,
which is available to eligible employers for wages paid to qualifying employees
on family and medical leave. The credit is available as long as the amount paid
to employees on leave is at least 50% of their normal wages and the leave
payments are made in employer tax years beginning in 2018 and 2019. That
is, under the Act, the new credit is temporary and won't be available for
employer tax years beginning in 2020 or later unless Congress extends it
further.
For leave payments of 50% of normal wage payments, the credit
amount is 12.5% of wages paid on leave. If the leave payment is more than 50%
of normal wages, then the credit is raised by .25% for each 1% by which the
rate is more than 50% of normal wages. So, if the leave payment rate is 100% of
the normal rate, i.e. is equal to the normal rate, then the credit is raised to
25% wages paid on leave. The maximum leave allowed for any employee for any tax
year is 12 weeks.
Eligible employers are those with a written policy in place
allowing (1) qualifying full-time employees at least two weeks of paid family
and medical leave a year, and (2) less than full-time employees a pro-rated
amount of leave. Qualifying employees are those who have (1) been employed by
the employer for one year or more, and (2) who, in the preceding year, had
compensation not above 60% of the compensation threshold for highly compensated
employees. Paid leave provided as vacation leave, personal leave, or other
medical or sick leave is not considered family and medical leave.
If you wish to discuss any of these credits in more detail and
the options you may have for your business, please contact us.
