The Tax Cuts and Jobs Act of 2017 opened a two-year window, from Jan. 1 this year to Dec. 31, 2019, for qualifying companies to receive a tax credit if they offer paid Family and Medical Leave Act (FMLA) time off. This month the IRS issued a set of FAQs to help explain how the credit works.
To qualify for the credit, a company must have a written leave policy in place offering at least two weeks of paid family leave annually, paying at least 50 percent of the leave-taker’s normal wages. To qualify for the credit, an employee must have worked for the company for at least one year, earn less than $72,000 a year, and take at least two weeks of such leave. The credit is not available in states and municipalities where paid leave is mandated by law.
The credit rises from 12.5 percent of wages paid, if those wages are at 50 percent, to 25 percent if the employer pays full normal wages during the leave period.
Reasons that qualify for family and medical leave:
- Birth of an employee’s child and to 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 his or her position.
- Any qualifying exigency due to an employee’s spouse, child, or parent being on covered active duty (or having been notified of an impending call or order to covered active duty) in the Armed Forces.
- To care for a service member who is the employee’s spouse, child, parent, or next of kin.