You probably know that the tax bill passed in early 2018 lowered the corporate tax rate. But did you know it also features tax credits for wages your company pays employees who take family and medical leave–in some cases, up to 25% back?
To qualify, your company must:
- Offer a clearly-written policy offering paid leave to employees specifically for FMLA-related reasons.* In other words, vacation days, sick days, and personal leave don’t count.
- Provide at least two weeks of leave, paid at a minimum of 50% for full-time or part-time workers who’ve been at your company at least a year. (Part-timer benefits can be scaled down to reflect their work hours.)
- Clearly state that you won’t retaliate against leave takers, even employees who aren’t considered eligible employees under the FMLA.
How the tax credit works:
- Only wages paid to employees who made $72,000 or less are eligible for the credit.
- Employers can’t claim the credit on wages paid to leave-takers in California, New York, New Jersey and Rhode Island, where paid leave is mandatory.
- You can claim the credit for up to 12 weeks of paid leave per employee.
- The more generous your policy, the bigger break you’ll get**:
- If you pay an employee 50% of his wages, you’d get back 12.5% of that amount.
- However, if you pay an employee 100% of her wages, you’d get 25% of that amount back.
What to do if this credit thing interests you:
If you’ve long dreamt of offering your employees paid leave, this may be the year to pitch your CFO or CHRO. If you are a CFO or CHRO, consider talking with your benefits team about the available options.
If you already have a qualifying policy:
- Make sure it meets the tax law’s guidelines–and that you have a way to track leave taken and wages paid
- Set up a Google Alert to get updates: the IRS will release clarifications and FAQs before the year is out
- When you’re running the math, keep in mind that this credit only applies to wages paid in 2018 and 2019
Want help explaining your paid leave policy, whether you’re eligible for credits or not?
ALEX can help! ALEX on Leave of Absence walks your employees through the entire leave process–from gathering the many reams of paperwork, to going back to work, and everything in between. Plus, it accommodates a wide variety of leave policies, and makes it easy for employees to access personalized info 24/7. Call us for a demo!
*New parents, employees with a serious health condition, employees caring for sick or injured family members, and employees handling needs associated with a military deployment.
**If you pay employees somewhere between 50% and 100% of their salary in paid leave, know that your credit goes up by .25% for each 1% increase in wage replacement.
If you enjoyed this post, make sure to also check out:
6 Tips on Creating a More Empathetic Leave of Absence Process
3 Reasons to Add an Interactive Benefits Decision Support Tool to Your 2018 Budget NOW
5 Tips for Helping Millennials (and Post-Millennials) Actually Use Their New Plans!