IRS Tax Reform Tax Tip 2018-183, November 28, 2018
Tax reform legislation enacted in December 2017 offers a new tax credit for employers who provide paid family and medical leave. Here are several facts about how this credit works and which employers are eligible to claim it:
- The credit is available for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2020.
- Some employers can claim the credit retroactively to the beginning of their first taxable year beginning after December 31, 2017, if they meet the terms of a transition rule on or before December 31, 2018.
- To be eligible for the credit, an employer must have a written policy in place that includes:
- At least two weeks of paid family and medical leave annually to full-time employees, prorated for part-time employees.
- Pay for family and medical leave that¡¯s at least 50 percent of the wages normally paid to the employee.
- Generally, for tax year 2018, the employee¡¯s 2017 compensation from the employer must be $72,000 or less.
The credit ranges from 12.5 percent to 25 percent of wages paid during an employee¡¯s leave.
For purposes of this credit, family and medical leave includes leave for one or more of the following reasons:
- Birth of an employee¡¯s child and to care for the child.
- Placement of a child with the employee for adoption or foster care.
- Care for the employee¡¯s spouse, child or parent who has a serious health condition.
- A serious health condition that makes the employee unable to do the functions of their position.
- Any qualifying need due to an employee¡¯s spouse, child or parent being on covered active duty in the Armed Forces. This includes notification of an impending call or order to covered active duty.
- To care for a service member who¡¯s the employee¡¯s spouse, child, parent or next of kin.