New Employer Tax Credit for Paid Family and Medical Leave

The new tax law (Tax Cuts and Jobs Act) creates a temporary tax credit for employers that provide paid family and medical leave. The tax credit is equal to a percentage of employee wages paid during leave.

To be eligible for the tax credit, an employer must have a written policy in place that provides at least two weeks of paid family and medical leave at a payment rate that is at least 50% of an employee’s normal pay rate. The tax credit only applies to leave that is taken for a reason permitted under the federal Family and Medical Leave Act (FMLA).

The tax credit applies to wages paid in taxable years 2018 and 2019. Employers of all sizes may qualify for the credit, even employers that are not required to offer family and medical leave under the federal FMLA.

The tax credit applies with respect to employees who have been employed by the employer for one year or more and, for the preceding year, had compensation not in excess of $72,000.

It is likely that the Internal Revenue Service (IRS) will issue regulations on the tax credit in the future. Employers should monitor IRS guidance for additional details on the tax credit.

Reference the below Compliance Bulletin for additional information and contact your NEEBCo representative with questions.

New Employer Tax Credit for Paid Family and Medical Leave