Under the Tax Cuts and Jobs Act, employers can claim a credit of the wages paid to employees who take time off under the federal Family and Medical Leave Act.

Prior Law

Through December 31, 2017

Under pre-Act law, for 2017, no such credit exists.

New Law

Effective for tax years beginning after December 31, 2017

An employer must have a written policy that provides a minimum of two weeks paid FMLA leave for full-time employees, or a proportionate amount of leave for part-time employees.
Employers may receive credit for up to 12 weeks of pay at the rate the employee would have been paid, had the employee been actively working.

Employers may claim a credit for 12.5% of the wages paid to qualifying employees during FMLA if the payment rate under the program is 50% of the wages normally paid to an employee.

The credit is increased by 0.25 percentage points (not to exceed 25%) for each percentage point by which the rate of payment exceeds 50%.

Commentary

The following shall not be considered when determining the amount of paid family and medical leave provided by the employer: State or local government paid leave; employer paid vacation leave; employer paid personal leave; or employer paid medical/sick leave.

Article written by: Marie Belter

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Greg Kenworthy
Greg Kenworthy
I am a partner at Hawkins Ash CPAs, focusing on the accounting and tax needs of privately held businesses and individuals. This includes tax return preparation, review, tax planning, research and financial statement compilation and review. Prior to and during my time at Hawkins Ash CPAs, I served two tours of duty with the Army in Iraq.

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