Certain employers may be eligible to receive a credit for paid family and medical leave in tax years after 2017. The IRS recently released Form 8994 and Instructions for how to claim the credit.
An eligible employer is one with a written policy providing paid family and medical leave satisfying minimum paid leave requirements. Paid vacation does not count as paid FMLA. Family and medical leave means leave for one or more FMLA purposes, including:
A qualifying employee is an employee who has been employed by the employer for 1 year or more and whose compensation for the preceding year doesn’t exceed an amount equal to 60% of the amount applicable for the year under Code section 414(q). To be a qualifying employee in 2019, an employee must have earned no more than $72,000 in the preceding year.
For an employer to claim the credit, the policy must:
Any leave paid by a state or government or required by state or local law is not taken into account in determining the amount of paid family and medical leave provided by the employer.
Employers may be able to claim a credit for the cost of the leave provided to eligible employees. The applicable percentage of the credit is based on the rate of payment for the leave under the employer’s policy. The base applicable percentage is 12.5%, which applies if the rate of pay is 50%. If the rate of pay is greater than 50%, the applicable percentage is increased by 0.25 percentage points for each percentage point by which the rate of payment exceeds 50%, up to a maximum applicable percentage of 25%.
The credit is claimed using Form 8994. A copy of that form, with instructions, may be accessed by clicking here.