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New Tax Credit for Employers Offering Family and Medical Leave Benefits to Workers by Adam Cohen, CPA


Posted on July 17, 2018 by Adam Cohen

The Tax Cuts and Jobs Act created a new tax credit for businesses that voluntarily offer their employees up to 12 weeks of paid family and medical leave in tax years 2018 and 2019.  Here are all of the details that employers need to know about claiming the credit.

How can Businesses Qualify for the Tax Credit?

Employers must voluntarily provide qualifying full-time employees with a minimum of two weeks of paid family and medical leave per year with a benefit of at least 50 percent of the worker’s normal wages, pursuant to a written policy. For part-time workers, employers must also provide a proportionate amount of paid leave based on the number of hours those employees work.

Who is a Qualifying Employee?

Businesses must have employed a worker for at least one year and paid him or her a certain amount in compensations. For 2018, businesses seeking to claim the credit must have paid the worker less than $72,000 in 2017.

How Much is the Credit Worth?

Employers that provide workers with the minimal leave benefit of 50 percent of normal compensation may claim a tax credit of 12.5 percent of that benefit amount. This credit can increase up to a maximum of 25 percent based upon a percentage of the normal compensation the employer pays to the employee above 50 percent.

The employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit. Any wages taken into account in determining any other general business credit may not be used toward this credit.

What Circumstances Qualify for Paid Family and Medical Leave?

A business may qualify for the tax credit when it has an employee who takes a leave of absence for any of the following reasons:

About the Author: Adam Cohen, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where he works with closely held businesses and non-profit charities, hospitals and family foundations to maintain tax efficiency and comply with federal and state regulations. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via e-mail at info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.