Employers who provide leave might qualify to claim valuable credit

IRS Tax Reform Tax Tip 2019-115, August 22, 2018

Employers who provide paid family and medical leave to their employees might qualify for a credit that can reduce the taxes they owe. It's called the employer credit for family and medical leave.

Here are some facts about the credit to help employers find out if they might be able to claim it.

To be eligible, an employer must:

  • Have a written policy that meets several requirements (PDF).
  • Provide:
    • At least two weeks of paid family and medical leave to full-time employees.
    • A prorated amount of paid leave for part-time employees.
    • Pay for leave that's at least 50 percent of the wages normally paid to employees.

Applicable dates:

It's available for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2020.

The amount of the credit:

The credit is generally equal to 12.5 to 25 percent of paid family and medical leave for qualifying employees. The percentage is based on how much employers pay each employee for family and medical leave.

Qualifying leave:

The leave can be for any or all the reasons specified in the Family and Medical Leave Act:

  • Birth of an employee's child.
  • Care for the child.
  • Placement of a child with the employee for adoption or foster care.
  • To 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 perform the functions of their job.
  • Any qualifying emergency due to an employee's spouse, child, or parent being on covered active duty in the Armed Forces. This includes the taxpayer being notified of an impending order to covered active duty.
  • To care for a service member who is the employee's spouse, child, parent, or next of kin.

Claiming the credit:

To claim the credit, employers will file two forms with their tax return. These are Form 8994, Credit for Paid Family and Medical Leave and Form 3800, General Business Credit.

More Information:

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