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New Tax Credit for Paid Family Leave in 2018

The Tax Cuts and Jobs Act that became law in December 2017 includes a tax benefit for certain employers that offer paid family and medical leave to their employees. The tax credit is available for the 2018 and 2019 tax years for employers with a written policy that meets certain requirements, including the following:

  • The policy provides paid family and medical leave for “qualifying employees,” which includes employees that have been employed by the employer for at least one year and had income less than $72,000 in the previous year (this amount may be adjusted in future years);
  • Qualifying employees that work full-time (those typically employed for more than 30 hours per week) are provided at least two weeks of annual paid family and medical leave;
  • Qualifying employees that work part-time (those typically employed for less than 30 hours per week) are provided a proportionate amount of paid leave, determined by the number of hours the employee is expected to work during a week; and
  • The paid leave provided to the employees must be at least 50% of the wages normally paid to the employee (the amount of the tax credit is increased for paid leave in excess of 50% of the normal wages).

Note: Unfortunately, leave that is required a result of state or local law is not eligible for the credit.

We encourage employers to review their current paid leave policies (if any) to ensure that they meet the requirements to take advantage of the new tax credits for leave during the 2018 tax year. For employers that offer paid leave but do not have a written policy in place, we encourage the employers to put a written policy in place as soon as possible to take advantage of the tax credit for the 2018 tax year.

For more information about anything discussed in this Client Alert, please contact a member of the Maynard Cooper & Gale Labor & Employment practice group.

This Client Alert is for information purposes only and should not be construed as legal advice.  This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship.  For more information or an explanation about the matters discussed in this Alert, please contact one of the attorneys listed above. 

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