FMLA Tax Credit

A new business tax credit may be available for certain employers who provide employees paid family and medical leave during 2018 or 2019.

Eligible employers are ones who:

• Provide at least two weeks of paid family and medical leave to full-time employees and a pro-rated amount of paid family and medical leave to part-time employees;
• Pay at least 50% of normal wages during the leave; and
• Have a written policy that meets certain requirements.

Leave must be provided for birth of a child, care for a child, placement of a child for adoption or foster care, care for a spouse, child or parent with a serious health condition, or a serious health condition of the employee that makes the employee unable to perform the functions of his/her position. The leave also must be provided for a qualifying exigency due to an employee’s spouse, child or parent being on active duty or being called to active duty and care for a service member who is the employee’s child, spouse, parent or next of kin.

Only payments to employees whose prior-year compensation was at or below a qualifying limit are eligible for the credit. For leave taken in tax year 2018, the employee’s 2017 compensation must be $72,000 or less.

The business tax credit is calculated as a percentage of the amount of wages paid while on family and medical leave for up to 12 weeks per taxable year. The minimum percentage is 12.5% and is increased by .25% for each percentage point by which the amount paid to a qualifying employee exceeds 50% of the employee’s wages (with a maximum of 25%).

Click here for more information on the employer credit for paid family and medical leave.