IRS Tax Credits For Employers Who Give Family Leave

Tax reform legislation enacted in December 2017 offers a new tax credit for employers who provide paid family and medical leave. Here are several facts about how this credit works and which employers are eligible to claim it:

  • The credit is available for wages paid in taxable years beginning after December 31, 2017, and before January 1, 2020.
  • Some employers can claim the credit retroactively to the beginning of their first taxable year beginning after December 31, 2017, if they meet the terms of a transition rule on or before December 31, 2018.
  • To be eligible for the credit, an employer must have a written policy in place that includes:
    • At least two weeks of paid family and medical leave annually to full-time employees, prorated for part-time employees.
    • Pay for family and medical leave that’s at least 50 percent of the wages normally paid to the employee.
  • Generally, for tax year 2018, the employee’s 2017 compensation from the employer must be $72,000 or less.

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