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L&H CPAs : Apr 3, 2019 9:00:00 AM
The Tax Cuts and Jobs Act created a new federal tax credit for employers that provide qualified paid family and medical leave to their employees. It’s subject to numerous rules and restrictions and the credit is only available for two tax years — those beginning between January 1, 2018, and December 31, 2019. However, it may be worthwhile for some businesses.
An eligible employer can claim a credit equal to 12.5% of wages paid to
An eligible employee is one who’s worked for your company for at least one year, with compensation for the preceding year not exceeding 60% of the threshold for highly compensated employees for that year. For 2019, the threshold for highly compensated employees is $125,000 (up from $120,000 for 2018). That means a qualifying employee’s 2019 compensation can’t exceed $72,000 (60% × $120,000).
Employers that claim the family and medical leave credit must reduce their deductions for wages and salaries by the amount of the credit.
Qualifying leave
For purposes of the credit, family and medical leave
Employer-provided vacation, personal, medical or sick leave (other than leave defined above) isn’t eligible.
The general rule is
However, under a favorable transition rule for the first tax year beginning after December 31, 2017, your company’s written leave policy (or an amendment to an existing policy) is considered to be in place as of the effective date of the policy (or amendment) rather than the later adoption date.
The new family and medical leave credit could be an attractive perk for your company’s employees. However, it can be expensive because it must be provided
© 2019
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