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Paid family and medical leave can mean a tax credit for employers

If your company has been considering offering paid family and medical leave, now may be the time to act. According to the IRS, the Tax Cuts and Jobs Act established a tax credit for businesses that offer such leave under a compliant policy. Even better, that credit can be taken in 2018, as long as you put a compliant policy in place before Dec. 31 and make it retroactive.

The tax credit is between 12.5 and 25 percent of the wages paid during a qualifying leave. The policy must apply to all statutory employees employed at your company for a year or longer, whether full time or part time, and paid no more than a specified amount, which is currently $72,000. The leave itself must be taken for a purpose permitted by the federal Family and Medical Leave Act.

The FMLA permits leave for the purposes of:

  • Caring for a newborn, adopted or newly fostered child
  • Caring for one's own serious medical condition
  • Caring for the serious medical condition of a spouse, parent or child
  • Dealing with a qualifying exigency arising from the active-duty military service of a spouse, parent or child
  • Caring for certain close-relative military service members who are suffering serious illnesses or injuries

What else must the policy include?

Your policy must not exclude any qualifying employees, so it must include part-time workers, for example, and cannot exclude anyone who meets the general qualifications. It must provide at least two weeks of leave per year for full-time employees and a proportionate amount for part-time employees. The paid leave must cover at least 50 percent of the employee's wages. If your company employs otherwise-qualifying employees who aren't covered by Title I of the FMLA, such as part-time workers, your policy must include "non-interference" language.

The IRS provided an example of the required non-interference language:

"[The company] will not interfere with, restrain, or deny the exercise of, or the attempt to exercise, any right provided under this policy. [The company] will not discharge, or in any other manner discriminate against, any individual for opposing any practice prohibited by this policy."

As we mentioned, you still have time to put a paid leave policy in place and claim the tax credit this year. As long as you put your policy in place by Dec. 31 and make it retroactive to the time when the leave was taken, you can claim the credit on your 2018 taxes. If you wait until next year, your policy must be in place before any such leaves are taken.

If you would like assistance with setting up a paid leave policy, discuss your situation with an experienced employment law attorney.

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